Thanks for the info. We have tried installing it as a stand alone application but this is wha happened.
We installed cutechat in it's own Virtual directory called CuteChat\web and then converted it to an Application (IIS 7). Then ran the SQL script on it.
The home page appears but when we click on Embed Chat we get the error:
An error has occurred while establishing a connection to the server. When connecting to SQL Server 2005, this failure may be caused by the fact that under the default settings SQL Server does not allow remote connections. (provider: SQL Network Interfaces, error: 26 - Error Locating Server/Instance Specified)