Installation Error-PI Usage Type

Dear All

We are installing SAP with PI as usage type and during "update database configuration" phase we are receiving error which says"sql1013n the database alias name or database name XD1 could not be found".We tried creating the database manually and were able to connect to it also however we arent able to get rid of this error.Also let us know how to update the instance on windows.

SAP Version:NW70

DB:DB6

OS:Windows 2003

Thanks in Advance

Arun