Delphi 2010, dbExpress, and SQL Server 2005 DB

I am trying to make a connection to a SQL Server 2005 DB using Delphi 2010 & DBExpress.

If I create a standard delphi application and hard code my connection (IT WORKS!):

procedure TForm1.Button1Click(Sender: TObject);
var
 Conn: TSQLConnection;
begin
 Conn:= TSQLConnection.Create(nil);
 Conn.ConnectionName:= 'VPUCDS_VPN_SE01';
 Conn.LoadParamsOnConnect := True;
 Conn.LoginPrompt:=True;
 try
   Conn.Connected:= True;
   if Conn.Connected then
   ShowMessage('Connected!')
   else
   ShowMessage('NOT Connected!')
 finally
  Conn.Free;
 end;
end;

All the ini files, and DLLs reside in the same folder as my executable

and yes, I have DBXMsSQL & MidasLib in the uses clause

again, it works if its not a web service!

However, if i then move the code over to a Web services CGI module:

function TTest.ConnectToDB: Boolean;stdcall;
var
 Conn: TSQLConnection;
begin
 Conn:= TSQLConnection.Create(nil);
 Conn.ConnectionName:= 'VPUCDS_VPN_SE01';  
 Conn.LoadParamsOnConnect := True;
 Conn.LoginPrompt:=True;
 try
   Conn.Connected:= True;
   result:=  Conn.Connected;
 finally
  Conn.Free;
 end;
end;

Thanks