Can the sde user be dbo or a member of the sysadmin fixed server role on MS SQL Server?
ArcSDE 8.0.2 supports the sde user as dbo (database owner). This means that the SDE user can be added to the sysadmin fixed server role, the dbcreator fixed server role (and create the sde database), or any other role that remaps permissions to dbo. NOTE: ArcInfo 8.0.2 does not support the sde user as dbo.