I too, am having some difficulty interpreting how to connect properly. I have created a small app without using security and it works so far in my tests (creating and using the BO's on forms). However, when using the security functions in another small app , I receive the above error. I have used the connection wizard to point to the SF database and I coded in my database name in program.cs to use my application data in my database (both on the same server). (Which works in the app not using security). Do you have to use the DTT to put the security tables into my database during development? 

Thank you.

SqlException
  Invalid object name 'dbo.SFSPreferences'.

Source     : .Net SqlClient Data Provider

Stack Trace:
   at System.Data.SqlClient.SqlConnection.OnError(SqlException exception, Boolean breakConnection)
   at System.Data.SqlClient.SqlInternalConnection.OnError(SqlException exception, Boolean breakConnection)
   at System.Data.SqlClient.TdsParser.ThrowExceptionAndWarning(TdsParserStateObject stateObj)
   at System.Data.SqlClient.TdsParser.Run(RunBehavior runBehavior, SqlCommand cmdHandler, SqlDataReader dataStream, BulkCopySimpleResultSet bulkCopyHandler, TdsParserStateObject stateObj)
   at System.Data.SqlClient.SqlDataReader.ConsumeMetaData()
   at System.Data.SqlClient.SqlDataReader.get_MetaData()
   at System.Data.SqlClient.SqlCommand.FinishExecuteReader(SqlDataReader ds, RunBehavior runBehavior, String resetOptionsString)
   at System.Data.SqlClient.SqlCommand.RunExecuteReaderTds(CommandBehavior cmdBehavior, RunBehavior runBehavior, Boolean returnStream, Boolean async)
   at System.Data.SqlClient.SqlCommand.RunExecuteReader(CommandBehavior cmdBehavior, RunBehavior runBehavior, Boolean returnStream, String method, DbAsyncResult result)
   at System.Data.SqlClient.SqlCommand.RunExecuteReader(CommandBehavior cmdBehavior, RunBehavior runBehavior, Boolean returnStream, String method)
   at System.Data.SqlClient.SqlCommand.ExecuteReader(CommandBehavior behavior, String method)
   at System.Data.SqlClient.SqlCommand.ExecuteDbDataReader(CommandBehavior behavior)
   at System.Data.Common.DbCommand.System.Data.IDbCommand.ExecuteReader(CommandBehavior behavior)
   at System.Data.Common.DbDataAdapter.FillInternal(DataSet dataset, DataTable[] datatables, Int32 startRecord, Int32 maxRecords, String srcTable, IDbCommand command, CommandBehavior behavior)
   at System.Data.Common.DbDataAdapter.Fill(DataTable[] dataTables, Int32 startRecord, Int32 maxRecords, IDbCommand command, CommandBehavior behavior)
   at System.Data.Common.DbDataAdapter.Fill(DataTable dataTable)
   at MicroFour.StrataFrame.Data.DbDataSourceItem.GetDataTable(DbCommand Command, OnChangeEventHandler CallBack)
   at MicroFour.StrataFrame.Data.SqlDataSourceItem.GetDataTable(DbCommand Command, OnChangeEventHandler CallBack)
   at MicroFour.StrataFrame.Data.DataLayer.GetDataTable(DbCommand Command, Boolean RegisterNotification)
   at MicroFour.StrataFrame.Business.BusinessLayer.FillDataTable(DbCommand CommandToExecute)
   at MicroFour.StrataFrame.Security.BusinessObjects.SFSPreferencesBO.FillAll(Int32 ProjectPK)
   at MicroFour.StrataFrame.Security.BusinessObjects.SFSPreferencesBO.RetrieveSecurityPreferences()
   at LumInvSys.Program.InitApplication(InitializingApplicationEventArgs e) in C:\MyProjects\LumInvSys\LumInvSys\Program.cs:line 161
   at MicroFour.StrataFrame.Application.StrataFrameApplication.Raise_InitializingApplication(InitializingApplicationEventArgs e)
   at MicroFour.StrataFrame.Application.StrataFrameApplication.RunApplication()
   at LumInvSys.Program.Main() in C:\MyProjects\LumInvSys\LumInvSys\Program.cs:line 40
   at System.AppDomain.nExecuteAssembly(Assembly assembly, String[] args)
   at System.AppDomain.ExecuteAssembly(String assemblyFile, Evidence assemblySecurity, String[] args)
   at Microsoft.VisualStudio.HostingProcess.HostProc.RunUsersAssembly()
   at System.Threading.ThreadHelper.ThreadStart_Context(Object state)
   at System.Threading.ExecutionContext.Run(ExecutionContext executionContext, ContextCallback callback, Object state)
   at System.Threading.ThreadHelper.ThreadStart()

Chris