Just use an OLEDB connection with ADO or you can also do it with a SqlConnection using a domain name or IP address. See Carl Prothman's site(http://www.able-consulting.com/ADO_Conn.htm) for all kinds of examples. It's actually way easier than RDS ever was. If you have specific issues, just keep posting.
Microsoft has been recommending developers to move away from RDS for awhile now. I bet there is something in the MDAC version that ships with Windows.NET Server that is breaking it. and if that is the case, you are pretty much out of luck since Microsoft made no claims of continuing to support it