Soapy,
When using SQL-Server with Windows Authentication (WinAuth), the windows user that is being used by QC to create/update projects should also be the same user/password specified as the ''log on'' user of the HP ''Application Lifecycle Management'' service on the QC Server.
If you changed the password in Windows for this user, you must also MANUALLY change it on your service at the QC Server -- it will not automatically pick it up.
If you changed the password in Windows only and still have not fixed the service password and re-started the service, then Site Admin might work, but only until the service is re-started, then it would fail because the password is wrong - the service may not have even started.
So, you should be good after changing the password used by the service and restarting it.
Also make sure that the password does not automatically expire due to some Windows secutity policy.
good luck!