finally found the answer to the problem

1st step was to go into sql server config manager > right click MICROSOFT#SSEE > Hide Instance change from yes to no

2nd step is to go into surface config area > set remote connections for MICROSOFT#SSEE for TCP/IP AND NAMED pipes.

 

I can now connect remotely to MICROSOFT#SSEE via SQL management studio.

There should be something in the Sharepoint 3.0 documentation about this as the default install renders surface area config manager useless