Error: Can't connect to the database during WSS / MOSS Configuration

This is a head-slapper that happened to someone on my team, the answer wasn't on-line so here it is...

Issue Description
After installing the bits, he runs Configuration enters credentials to connect to SQL and create the configuration database. Next fails with a message that the database server is non-existent or we don’t have the rights to connect to it.

SQL Server’s Event Log contains the following MSSQLSERVER entries:

“SSPI handshake failed.”
“Login failed for user ‘’. Reason: Not associated with a trusted SQL connection.”

To confirm, the username appeared blank. The service account is a domain account, the account has the correct rights in the database and can be used to login to Management Studio locally to create databases. DCA is enabled on the SharePoint machine. The SQL server allows Mixed authentication. On the SharePoint side we’ll set NTLM when we get that far.

Solution
You need to be logged in as a Domain Administrator, not just a local Administrator while running the SharePoint Configuration utility. [Sound effect: head slap!]

Why? You've entered your credentials into the form, doesn't the Configuration Utility use these to authenticate to SQL Server? It's not that simple. Your process first needs access to network resources to get a token to start the conversation with the SQL Server, after which it can submit the credentials you've entered. A local administrator doesn't have that right.