I've been trying to do a simple encrypted message exchange with WSE 3.0 on
.NET 2.0.  All that I really want to do is encrypt the message so it can't
be intercepted en route.  It's for a demonstration, so full-blown security
considerations need not be taken (it is enough to exchange a message, show a
trace, then say "voila! it's encrypted!").  I thought I could just adapt the
Security\SecureConversation sample installed with WSE 3.0.  I was
disappointed that I needed multiple levels of setup to install keys and set
permissions.  I have also used Indigo/WCF and can encrypt messages with *no*
extra steps.  Maybe I'm missing something?

Anyway, I run the Setup.bat in the "[Program Files]\Microsoft
WSE\v3.0\Samples" folder and all is well.  Then I run the
CreateSampleVdir.bat from the ...\SecureConversation\Policy folder.  Again,
no errors.  The sample does not run.  Exception every time.  If I open
http://localhost/SecureConversationPolicy/SecureConversationService.asmx
file in IE I see "Unable to connect to database.  Check database connection
information and make sure the database server is running.  For tips on
troubleshooting this error, search for article 823287 in the Microsoft
Knowledge Base at http://support.microsoft.com."  Then I noticed that, by
default, the application also deploys to the built-in (Cassini) web server
(almost the same URL, different port).  This deployment works fine.  If I
modify the URL in the solution to point at that all is well.  If I point to
the IIS-hosted vdir, it fails for the reason above.

I'd love to just say that I'll use the built-in web server option since it's
just a demo, but it's intended exclusively for debugging, so can't be hit
from another machine (unless there's a hack I don't know of...).  The IIS
management tool shows the vdir just fine -- it just gives that error when
hitting the ASMX page.  The article ID referenced in the error relates to
SharePoint which makes no sense anyway.  I did confirm that the Network
Service account has permissions to SQL Server, but this should have no
dependency on that.

Any help would be very much appreciated!
-Arian