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Hi there,
Thanks for posting, and sorry for the problems you've been having. It's possible this may be to do with the security settings for .NET 1.1 on your system. You should ensure that all your .NET applications run in the trusted zone for the user account you're running under. This setting is available under Control Panel > Administrative Tools. This is necessary because SQL Prompt directly accesses some functionality of the Win32 API.
Hope that helps.
Many thanks,
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I then tried using "Run As" to launch SQL Prompt under a privileged account on the system. Same error. I then ran SQL Prompt and Management Studio both under the privileged account and the error went away.
Any ideas?