I now have no hair left and I have exhausted every trick that worked for others...
My environment is 64bit system with exchange. SQL is installed on a hyper-V.
Everything works fine.
This means that Sharepoint is installed, I can ping database from core server and from remote server.
I can log onto the database using ODBC from core server and from remote pc.
I have created the users as recommended BUT when running Sharepoint Products Configuration wizard I get the error:
Cannot connect to database master at SQL Server. I use the same credentials that allows me to access the DB from other apps like VS 2010. I have googled and found many similar issues from others but just cannot get past this point.