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Download and install the SQL Server native client:
It worked for me on a 32-bit OS with ArcGIS Desktop 10.1 and a geoDB in ArcGIS Server 10.1 with SQL Server 2008 R2.
I just upgraded our license server to 10.1 and ran into the same problem. Esther Scharnhorst's suggestion worked for us as well.
I just did what Esther suggested and worked. The problem is fixed.
I did it in a 64-bit environment.
Esther, do you have any insights on what is the reason for this behavior? I had some other installations whit the same media and had no problems at all.