I'm planning on giving another couple of SharePoint courses in near future. 5060 and 5061. During each and every course my students aske me questions about topics that are not covered in detail in those courses. Such as examples for using Single Sign On (SSO) or Content Publishing. So now I'm making a VPC which will have it all. From Analysis Services KPIs to BDC and SSO. During my research I found two great blog posts on how to do SSO with MOSS:
Michael Hofer's Sharepoint Blog explains hot to use SSO with BDC. SSO will overcome the problems of using Mixed Mode Authentication to databases behind firewalls or outside of the domain. In one of the comments you will find a tip on how to use SSO to impersonate an application account set up in AD.
The second Post I found at Microsoft by the SharePoint Designer Team Blog explaining how to set up a Dataview in SPD using SSO to a Database. This post effectively uses an application account created in AD to connect to the DB and then SSO to connect to it. Works like a charm.