It seems that there is a problem with the test button. A few hints
1) Always use upper case (username, Db name)
2) Leave Instance name empty. Do not enter something..
3) Never trust Test Connection button while adding data source since even if it states you fail you may not but it is hard to guess if you really fail or not!
4) Do not trust Websense adding data source help page. It is old needs to be updated for sql 2008 R2