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server 2003 with sql 2000 error 0x800423f4

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If you change the service to logon as "LocalSystem", my experience is that you do not have to change anything else as long as you are using the mixed authentication mode for SQL Server.

I would still look at the possibility that this server cannot find that master domain controller and is not updating its domain controller. Can you move that computer to the same switch that the master domain controller is attached to? If you can, I would do that first and then force a domain replication to ensure that you are working with an updated domain controller. The best way to eliminate the switch as a problem is to temporarily replace that switch with a hub. Yes, it will potentially slow down traffic, but if the switch is the problem, you will begin to see access to SQL restored. Also, don't forget to check your system and application event logs. Specifically look for the SQL SERVER source events and find out what problem SQL SERVER is reporting.