TransactionScope question

We have the following code which is failing with this error -

The partner transaction manager has disabled its support for remote/network transactions. (Exception from HRESULT: 0x8004D025)


                using (TransactionScope scope = new TransactionScope())
                {
                    Settings settings = new Settings();
                    SqlCommand cmd1 = new SqlCommand("SELECT * FROM DBO.Test1");
                    SqlCommand cmd2 = new SqlCommand("SELECT * FROM DBO.Test2");
                    cmd2.Connection = new SqlConnection(settings.ApplicationConnection);
                    using (cmd1.Connection = new SqlConnection(settings.ClientConnection))
                    {
                        cmd1.Connection.Open();
                        using (cmd1.Connection = new SqlConnection(settings.ClientConnection))
                        {
                            cmd2.Connection.Open();

                            cmd1.ExecuteReader();
                            cmd2.ExecuteReader();
                        }
                    }
                    scope.Complete();
                }

We are using sql 2000 for one of the dbs and sql 2005 for the other db.  We are using c#.