There are a number of customers working to properly secure their SharePoint implementations. The Security Hardening documentation from Microsoft titled, "Plan and Design for Security (Windows SharePoint Services and Office SharePoint Server combined".
In fact, the Security Hardening guide recommends restricting access to the SQL ports: TCP port 1433 and UDP port 1434. Also, there are a number of SharePoint Technology - Windows SharePoint Services 3.0 and Office SharePoint Server 2007 - related recommendations; for example, Block UDP port 1434, Configure SQL Server named instances to listen on a non-standard port; block TCP port 1433 and re-assign the port; Configure SQL client aliases on all Web Front End and Application layer servers - ES, Index, Query and others in the farm.
This approach provides a greater degree of protection for your SQL Server communications. It also ensures that all servers in the SharePoint Farm follows a more restricted communication model.
Let's say that after properly configuring your security strategy your organization decides to use the Microsoft Single Sign On (SSO) technologies. You navigate to the SharePoint Central Administration v3 web site. You locate the configuration link for the SSO. You configure all of the settings and click on OK button.
Your browser refreshes. You notice that there is an error message. The error message encourages you to verify your SQL Server name and other configuration on the page.
You begin to bang your head against the monitor gently. As you take a look at the event logs - on the WFE server and the SQL Servers - and troubleshoot the TCP/IP stack. You notice that there is not an indication of of a notable error.
What we found that was encouraging the return of the SQL Server error message was the organization's security hardening policies. If your organization plans to use the SSO, the 1434 port must remain open. Of course, it would have been great to receive an error message that would provide more - specific - information that would have saved quite a few man hours.
In order to get rid of this error message, you would need to unblock port 1434 on your SQL Servers.
That is just my $19.11 worth.