I've always been puzzled as to why the Web Site Administration tool shipped with ASP.NET 2.0 didn't seem to function nor error out when I had a brand new application being developed on my workstation where SQL Server 2005 Developer Edition is installed.
The ASP.NET 2.0 machine configuration has a pre-defined connection string for providers which is tied to the default SQL Server 2005 Express Edition configuration that ships with Visual Studio 2005. I never installed the Express edition because the projects I work on typically require the more advanced SQL Server feature set. As a result I use the Developer Edition for most of my work. To get the 'out-of-the-box' functionality of the Web Site Administration Tool I made a few changes to the machine.config. Here's an excerpt of what I use on my C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727\CONFIG\machine.config:
<connectionStrings>
<add name="LocalSqlServer"
connectionString="data source=.\SQL2005DEV;Initial Catalog=aspnetdb;Integrated Security=SSPI"
providerName="System.Data.SqlClient" />
connectionStrings>