The server must be configured for TCP/IP which will open 1433, is that open? I think by default it is named pipes only, but I really don't play with MsSQL all that often. If 1433 isn't open, go and open it, start -> Programs -> MSsql -> SQL Server Network Utility.
As far as authentication, you may just want to try the sa account with no passwd. Most SQL Servers i have seen havent had a password because that is how it is by default.
<?
if(mssql_connect("SQL_SERVER_IP","sa",""))
echo "connected";
else
echo "Counldnt connect";
?>
If not can you not create accounts? You can have sql server and windows authenication at the same time.
Just a side note, if you are connecting for a website, to be Legal, you have to buy a internect connector lic from microsoft, i think it is $3800 dollars per processor in the SQL Server.