Hi there,
By default Visual Studio assumes your SQL Server instance is called .\SqlExpress. Maybe that's causing the issue? Did you install SQL like this as explained in Chapter 1? Do you know the name of your SQL Server instance?
Also, try Google for the exact error messages. This error has been reported a number of times before. The solution is often related to deleting a user folder under Documents for a specific account, but you'll need to read the posts yourself to determine which solution applies to you.
Here's a similar case where deleting the folder seemed to work:
Failed to generate user instance of SQL Server
Cheers,
Imar