Sharepoint install issue

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I'm trying to install Sharepoint Foundation, but I'm not having much luck.

I have SQL Server 2008r2 running on another VM.
On the Sharepoint VM, I attempt to run the configuration wizard, create new farm, enter the db server details which all seems fine until we reach the final configuration.

The database has been created but it fails with an exception "The request is not supported"

Relevant log section below. Any ideas? :/

9 INF Using NTLM for sql connection string
02/07/2012 09:48:45 9 INF Creating a new farm with config db SP_Config content db SharePoint_AdminContent_36db7456-bad6-4505-9581-5854479bb117 server sql2 for farm mode
02/07/2012 09:48:47 9 ERR Task configdb has failed with an unknown exception
02/07/2012 09:48:47 9 ERR Exception: System.ComponentModel.Win32Exception: The request is not supported
at Microsoft.SharePoint.Win32.SPNetApi32.NetLocalGroupAdd(String groupName, String comment)
at Microsoft.SharePoint.Administration.SPServer.EnsureLocalSecurityGroups()
at Microsoft.SharePoint.Administration.SPFarm.Create(SqlConnectionStringBuilder configurationDatabase, SqlConnectionStringBuilder administrationContentDatabase, IdentityType identityType, String farmUser, SecureString farmPassword, SecureString masterPassphrase)
at Microsoft.SharePoint.Administration.SPFarm.Create(SqlConnectionStringBuilder configurationDatabase, SqlConnectionStringBuilder administrationContentDatabase, String farmUser, SecureString farmPassword, SecureString masterPassphrase)
at Microsoft.SharePoint.PostSetupConfiguration.ConfigurationDatabaseTask.CreateOrConnectConfigDb()
at Microsoft.SharePoint.PostSetupConfiguration.ConfigurationDatabaseTask.Run()
at Microsoft.SharePoint.PostSetupConfiguration.TaskThread.ExecuteTask()
02/07/2012 09:48:47 9 INF Entering function Common.BuildExceptionMessage
 
What account are you running the install under? Does the account have the required DB privileges?

The account must be a domain account, local admin and securityadmin, dbcreator permissions for SQL. Possibly db_owner also. Is named pipes enabled in the SQL config?
 
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