This is due to the fact that MSDE installed an instance of SQL Server, rather than the default instance. additional instances of SQL Server are installed as YOURSERVERNAME\INSTANCENAME. SPSv2 installs it as YOURSERVERNAME\SHAREPOINT.
to verify, go to Administrative Tools->Services, and locate the running SQL Server instance.
To connect to an instance of sql server via osql or Ent. Mgr., establish the connection as SERVERNAME\INSTANCENAME, for example, if your server name is MYSERVER01 and the instance name is SHAREPOINT, enter MYSERVER01\SHAREPOINT into Ent. Mgr. server registration window.