That is nice that you have a dedicated VM for testing.  I imagine you have the databases set up so they are both running off of the same VM then...

Another thing you could do is look at HA software.  Backups are more about DR than HA.  
DH2i has a tool called DxEnterprise which handles HA quite nicely as...

heh... whoops.  Guess reading your signature would have helped.  I don't know too many men named Gail.  Sorry about that.  I think the avatar threw me off.

Do you have 1 database for all of the "towns" or 1 database per "town"?  Your description makes it sound like 1 database that holds all of the towns.
Rather...

Another good thing to look for is local SQL Chapters or SQL events.  Some are free (SQL Saturday for example) while others cost money (PASS Summit, SQL Cruise, etc).  They...

To make that easier to read:
LEFT(U.FULLNAME,charindex(',', U.FULLNAME)- 1) AA,
CHARINDEX(LEFT(U.FULLNAME,charindex(',', U.FULLNAME)- 1), P.Project_Name) CCOUNT 

Next, as a thought, why not try replacing it with:

you sure the IP is correct?  I've seen servers change IP's after reboot.  

Can you connect to that via SSMS?

First try connecting via SSMS from the...

First, can we get some DDL so we can test things easier on our end for writing and testing the code?

Next part in my mind is a tad...

One other thought I have:
your Flat File Connection Manager screen looks different than Phil Parkin's.  Which version of visual studio are you guys using?
I've seen oddities with SSRS and...

That is odd.  I have not installed 2005 before, but I know with 2008 R2 and higher I've installed and uninstalled using the base media (with no service pack) even...

I think you'd want to have the same installation media.  As you pointed out, using incorrect installation media cannot remove all of the features.

But Microsoft offers all of...