The above error is obvious when you have setup the SQL Server instance to accept only 1 connection. The default setting for number of user connections is '0' which accepts unlimited connections. With similar settings one of my friend have had issues and called me for a help, as the setup was SQL Server 2005 for use with ASP.NET 2.0 WebParts. They do not have any SQLExpress installations as it is by default within such instances. So the problem the relevant SQL 2005 instance has been restarted last...(
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Read the complete post at http://sqlserver-qa.net/blogs/tools/archive/2007/09/26/could-not-connect-because-the-maximum-number-of-1-user-connections-has-already-been-reached-the-system-administrator-can-use-sp-configure-to-increase-the-maximum-value-the-connection-has-been-closed.aspx