Ok this is really strange i was able to get past the error "The user instance login flag is not supported on this version of SQL Server. The connection will be closed." by just changing the Connection String in web.config as follows:

 <connectionStrings>
  <add name="aspnet_staterKits_TimeTracker" connectionString="Data Source=RELSEC_FE\SQLServer2005;Integrated Security=True;AttachDBFilename=|DataDirectory|TimeTracker.mdf;User Instance=false"/>
  <remove name="LocalSqlServer"/>
  <add name="LocalSqlServer" connectionString="Data Source=RELSEC_FE\SQLServer2005;Integrated Security=True;AttachDBFilename=|DataDirectory|TimeTracker.mdf;User Instance=false"/>
 </connectionStrings>

 Note the only thing I did was changed 'User Instance=false' from 'true'.  Nothing else.  Then when i started the site it created a database but used the whole path as part of the database name.  So my dbname is C:\DOCUMENTS AND SETTINGS\username\MY DOCUMENTS\VISUAL STUDIO 2005\WEBSITES\TIMETRACKER1\APP_DATA\TIMETRACKER.MDF.  But hey it works now and I can login.  I tried changing it to just 'timetracker' but it failed so I left it this way.  Not sure how to change the name to just 'timetracer' without making the rest of the App fail.

Anyway those who are getting this error, please try just changing the web.config as i did above. 

Hope this helps.