My experience has been with W2K3;IIS6;.NET 2.0 Medium Trust;SQL Server 2005 on a separate machine from DNN;DNN4.0.x

The Index Service must be running on the same machine as SQL Server, otherwise SQL cannot attach. When you name the Catalog, do *not* use a hyphen in the name.

The folder containing your DMX collection must be available as a share as it will be referenced as a UNC path in Indexing service. (I place my DMX folders outside of the root DNN web site folders and create a hidden share.) When you add a folder to the index service, you are able to specify an account with access permissions. I use a dedicated Domain account and give it Read & Execute access to the DMX share and folders. Also, this account needs R&E permissions on the catalog folder you specify.

To get DMX to attach the catalog, you must do two things:
First, assign the DMX collection location to the same UNC path created above.
Second, the account running the application pool for your DNN web site, which already has access to the DNN dB, must be given temporary SQL Admin permission before you attempt to attach the catalog. Once attached, you can remove that permission.

I know the above is a bit convoluted, but it is the only way to get it to work when you have SQL on another server.

I hope this short summary helps you.

Rob Ralston