Thanks for the reply.
Since my original post I continued to dig, fight, and scrape my way to a solution. Although I found many answers, none worked for my setup. However, I did find a solution and am now (as I type this) into section "Creating a Data Access Layer". My solution:
I upgraded from 2000 to 2005 Dev, needed doing anyway...
I manually created a copy of the ASPNetDB.mdf file in the App_Data folder, Created with aspnet_regsql.exe utility that came with '05 Dev.
I had no problem creating a connection to it in using Server Explorer, but the ASP.Net Configuration tool still failed. This lead me to verify all connection strings.
I discovered that the Configuration tool used the CS from machine.config so I changed the connection strings data source = localhost.
This didn't work but I did get a different error message which helped track down a small tidbit on MSDN that stated that the User Instance setting in the machine.config connection string, when set to true, caused the SQLConnectionHelper to treat the data source as SQLEXPRESS no matter what it is set to in the data source parameter.
I changed the User Interface parameter to false, and Walla Walla, it worked.
Thanks again and wish me luck with the rest of the book...