Check the credentials and ports
But CDP connects to Repo with no problem with the same credentials and port
Are there any relevant errors in the am.log or repository.log?
I have AO 7.7's Repository running against a MSSQL 2008 DB and have no problems. I know this obviously doesn't fix your problem, but it does show the repo works just fine with MSSQL 2008.
As Gordon said; any relevant errors in any of those logs?
It is kind of magic quoting Freddy Mercury
After restarting the box it works fine.