BizTalk errors when connecting to remote SQL database

We are running BizTalk 2006 R2 on Windows Srv 2003. We are trying to get BizTalk to connect to a another server running SQL 2003 (also running on Win2k3) and automatically run some storage procedures. Both servers are running in a virtual environment. It appears BizTalk can connect to the database but errors out when trying to run the procedures. We can successfully connect to the database from the BizTalk server and manually run the procedures. I've pasted the errors from the BizTalk Srv below.  Also there is another standalone web server that connects to the same SQL server and database. It has a different set of storage procedures that it runs successfully. We've tried a few different things with no success. Any help is greatly appreciated!

Event Type: Warning
Event Source: BizTalk Server 2006
Event Category: BizTalk Server 2006
Event ID: 5740
Date:  9/18/2009
Time:  10:50:02 AM
User:  N/A
Computer: PEDALS
Description:
The adapter "SQL" raised an error message. Details "New transaction cannot enlist in the specified transaction coordinator. ".


Event Type: Warning
Event Source: BizTalk Server 2006
Event Category: BizTalk Server 2006
Event ID: 5743
Date:  9/18/2009
Time:  10:50:02 AM
User:  N/A
Computer: PEDALS
Description:
The adapter failed to transmit message going to send port "GetInitialValues.SQL" with URL "SQL://PEDALSDBDEVSERV/PeDALS_DLB/". It will be retransmitted after the retry interval specified for this Send Port. Details:"New transaction cannot enlist in the specified transaction coordinator. ".


Event Type: Warning
Event Source: BizTalk Server 2006
Event Category: BizTalk Server 2006
Event ID: 5740
Date:  9/18/2009
Time:  10:55:02 AM
User:  N/A
Computer: PEDALS
Description:
The adapter "SQL" raised an error message. Details "New transaction cannot enlist in the specified transaction coordinator. ".


Event Type: Warning
Event Source: BizTalk Server 2006
Event Category: BizTalk Server 2006
Event ID: 5743
Date:  9/18/2009
Time:  10:55:02 AM
User:  N/A
Computer: PEDALS
Description:
The adapter failed to transmit message going to send port "GetInitialValues.SQL" with URL "SQL://PEDALSDBDEVSERV/PeDALS_DLB/". It will be retransmitted after the retry interval specified for this Send Port. Details:"New transaction cannot enlist in the specified transaction coordinator. ".


Event Type: Warning
Event Source: BizTalk Server 2006
Event Category: BizTalk Server 2006
Event ID: 5740
Date:  9/18/2009
Time:  11:00:02 AM
User:  N/A
Computer: PEDALS
Description:
The adapter "SQL" raised an error message. Details "New transaction cannot enlist in the specified transaction coordinator. ".


Event Type: Warning
Event Source: BizTalk Server 2006
Event Category: BizTalk Server 2006
Event ID: 5743
Date:  9/18/2009
Time:  11:00:02 AM
User:  N/A
Computer: PEDALS
Description:
The adapter failed to transmit message going to send port "GetInitialValues.SQL" with URL "SQL://PEDALSDBDEVSERV/PeDALS_DLB/". It will be retransmitted after the retry interval specified for this Send Port. Details:"New transaction cannot enlist in the specified transaction coordinator. ".


Event Type: Error
Event Source: BizTalk Server 2006
Event Category: BizTalk Server 2006
Event ID: 5754
Date:  9/18/2009
Time:  11:05:02 AM
User:  N/A
Computer: PEDALS
Description:
A message sent to adapter "SQL" on send port "GetInitialValues.SQL" with URI "SQL://PEDALSDBDEVSERV/PeDALS_DLB/" is suspended.
 Error details: New transaction cannot enlist in the specified transaction coordinator.  
 MessageId:  {FFB243AF-8251-432E-9DB2-09C50E573210}
 InstanceID: {055612FE-BE73-4CDA-8486-6EDF9FDAC3C9}


Event Type: Error
Event Source: XLANG/s
Event Category: None
Event ID: 10034
Date:  9/18/2009
Time:  11:05:03 AM
User:  N/A
Computer: PEDALS
Description:
Uncaught exception (see the 'inner exception' below) has suspended an instance of service 'PeDALS.AZ.Orchestrations.MaricopaMarriageCertificate(9b1c471e-6c4d-d22c-fdc8-c64b7c471e36)'.
The service instance will remain suspended until administratively resumed or terminated.
If resumed the instance will continue from its last persisted state and may re-throw the same unexpected exception.
InstanceId: 3308f558-0df2-423e-b4a2-363d9d8894d0
Shape name:
ShapeId:
Exception thrown from: segment -1, progress -1
Inner exception: An error occurred while processing the message, refer to the details section for more information
Message ID: {FFB243AF-8251-432E-9DB2-09C50E573210}
Instance ID: {055612FE-BE73-4CDA-8486-6EDF9FDAC3C9}
Error Description: New transaction cannot enlist in the specified transaction coordinator.

       
Exception type: XlangSoapException
Source: Microsoft.XLANGs.BizTalk.Engine
Target Site: Void VerifyTransport(Microsoft.XLANGs.Core.Envelope, Int32, Microsoft.XLANGs.Core.Context)
The following is a stack trace that identifies the location where the exception occured

   at Microsoft.BizTalk.XLANGs.BTXEngine.BTXPortBase.VerifyTransport(Envelope env, Int32 operationId, Context ctx)
   at Microsoft.XLANGs.Core.Subscription.Receive(Segment s, Context ctx, Envelope& env, Boolean topOnly)
   at Microsoft.XLANGs.Core.PortBase.GetMessageIdForSubscription(Subscription subscription, Segment currentSegment, Context cxt, Envelope& env, CachedObject location)
   at Microsoft.XLANGs.Core.PortBase.GetMessageId(Subscription subscription, Segment currentSegment, Context cxt, Envelope& env, CachedObject location)
   at PeDALS.Orchestrations.GetInitialValues.segment1(StopConditions stopOn)
   at Microsoft.XLANGs.Core.SegmentScheduler.RunASegment(Segment s, StopConditions stopCond, Exception& exp)

Regards,
Paul