Creating a connection to the server requires that the server is reachable via TCP/IP or named pipes. Both protocols can be enabled in the SQL Server Configuration Manager under Network Configuration. If you want to connect to "localhost", then TCP/IP must be enabled. Using "." as a server name requires named pipes to be enabled.
Using the tcp: or lpc: prefixes before the server name forces the use of a given protocol ( tcp: will force the usage of TCP/IP transport and the use of lpc: will force shared memory transport) though others might be enabled and preferred otherwise (the order of the protocols is important during enablement).
In case of both of the versions of MSSQL, you will need an account on an active server. Once a connection is established, the user must be able to log in. This can be achieved by either creating a user within the SQL server (limiting the login-scope to the database server) or more easily - by allowing mixed mode (Windows and SQL Server) logins. When Windows login is allowed, the integrated security setting can be used and no password needs to be specified.
You should also have the right to create/modify databases, since the Telerik Data Access Visual Studio Integration will automatically create/update databases as required.
You could use Telerik Data Access with MS SQL Server 2000 or later.