Installing WSUS

I am trying to install WSUS to a server that already has SQL 2000 SP4 on it.
When I get to the database options screen of the install, it asks me to pick
a SQL instance name. The only option available in the drop down is
<DEFAULT>. The SQL Instance on the server is named and registered, but not
showing in the list. When I click next I get the message "Failed to connect
to SQL Server" Then it shows the name of the server. Next line says that
WSUS requires a version of SQL Server no earlier than SP3. I have SP4, so I
am kind of stuck.

Am I missing something basic here?
.

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