Hello S G,
The new release of Test Studio you have contains both previous WebUI QA Edition + Dev Edition products now - so it is basically the same product plus additional Visual Studio version, including new features and improvements.
Back to your problem - please try to create a brand new DB using Create New Scheduling Server application and provide SQL server address and a new DB name. Once you have the scheduling server configured and running, you should be able to connect to it through your project.
Please tell us if it worked this time for you and the exact steps you are performing if not.
the Telerik team
Do you think you know all the new features coming out in Test Studio R1 2011? Think again - we have some surprises and will share them with you in the What's New in Test Studio R1 2011 Webinar on May 12th.