It's happened to everyone. You're supposed to be an expert in your field, and then you go and get tripped up by something insignificant. If you're like me, you think you've already eliminated the offending possibility, and it's only after the client (ack!) checks out your assumptions that you realize your foolish mistake (in this case, it was the assumption that the server's software firewall had nothing to do with the problem... but it did).
So there I was, running PSConfig on a two-server farm (one MOSS box, one SQL 2008 box), and I got the following error:
The server parameter specified
with the configdb command is invalid.
Failed to connect to the database
server or the database name does not exist. Ensure the database server
exists, is a Sql server, and that you have the appropriate permissions
to access the database server. To diagnose the problem, review the
extended error information located at C:\Program Files\Common
Files\Microsoft Shared\Web Server Extensions\12\LOGS\PSCDiagnostics...
Since these were all new accounts for the MOSS farm, I thought they didn't have proper access (this had been a problem the previous day)... but no, I could log on to the DB server just fine. I noticed, however, that I couldn't get into SQL Management Studio via Windows authentication; this led me to all the usual checks for Windows auth, TCP/IP, remote connections, etc.
At some point after contacting the DBA, that local login problem went away, but I had already let it steer me down a rabbit trail. At that point my mind should have shifted back into "obvious mode", but I'm a hardcore geek, for crying out loud; this doesn't come easy for me. Suffice it to say that you should always, ALWAYS go through your "duh" checklist again, even if you think you've covered it all.
One final note: while searching for clues on this crazy chase, I came across someone who claimed that their problem was an incorrect collation mode on an already-created database. The latest version of MOSS (as of this writing) gives a more specific error if that is indeed the problem (but don't let me keep you from checking it just in case!)