I had exactly the same problem, solved it by switching to SQL authentication instead of Windows authentication as I couldn't find another solution.
I'm not sure why the agent handler would need "local domain" credentials just to reach the database through ADO, but apparently it seems to do. It kind of defeats the purpose with agent handlers a bit.
but your correct if you using SQL authentication it works.
Hope it helps others as well.
With kind regards,
I've got the same problem A question is not connect to McAffee, but how I can switch to SQL authentication instead of Windows authentication. I'm starter in SQL Server?
I've found simple answer - http://msdn.microsoft.com/en-us/library/ms188670.aspx