Thank you for your post. Although it sounds like you have done the setup correctly, it is difficult to determine the cause without being in front of the machine.
Did you encounter any problems when installing the SequeLink driver? Did you install it via the setup or through the Control Panel?
Was there any difficulty setting up the FileMaker database file? Does the database file have any spaces in the name?
What is the difference in your user account between Server 2003 and Windows XP?
Does this happen with any file or just this one file? If the latter, make sure the ODBC sharing for the file is turned on. If it is, change the access to All Users for testing purposes, and then try again.
Any additional information you can provide may help with narrowing down the possibilities.
1. I encountered no problems with using the stand-alone .exe installer.
2. None of the records or names of files I used have spaces in them. They are consist solely of alphanumeric character.
3. As far as I can tell, nothing.
4. It happens with any file :(
Did you try changing the server name from 'localhost' to '127.0.0.1' or to the actual IP address?