Do you need to create the database or just the connection to the database? If you need to create the database it might be best to include a starter database and attach it once the user has selected the SQL server and provided credentials. If the user is familiar with SQL they may want to attach the database and supply their own permissions. Some of my larger customers prefer tighter control and manage the database.
You can also use the MS Data Connection UI. http://archive.msdn.microsoft.com/Connection/Release/ProjectReleases.aspx?ReleaseId=3863
The data connection dialog document on that page explains how to use the UI. You just save the connection string it returns. It can also attach a database from a file.
To load the database at run time, I first establish the connection in my development environment. This gives you an application setting for the connection string. Add code to check the string and if the connection string is invalid use the UI to allow them to create the proper connection string. Save this string to the application setting like this My.Settings.YourConnectionString = TheStringFromUI. Now you have a saved string that you can use right before Tableadapter.Fill. Use the this new connection string like this: YourTableAdapter.Connection.ConnectionString = My.Settings.YourConnectionString
There's a lot of examples of this once you know what to look for.