to login to sql server, first, assign a password for sa user,
or any user, and map the database to the user.
you may use db_owner for default role mapping.
then open sql configuration manager
select sql server netwrok configuration > Protocols for localhost / express / your instance name
scroll to bottom, and set:
all ports: 1433
dynamic port: (empty, not even a zero)
then goto control panel > services > sql server
restart service,enable sql browser (auto start delayed) and start service
this shall help to make it work with rails or tiny_tds