This post is long pending, since I had worked on the topic around 2 months back.
According to GP Installation Instruction, To set up an ODBC data source, enter the name you assigned to the SQL Server when you installed Microsoft SQL Server. A data source name called Dynamics GP also is created using SQL Native Client. If you don’t want to set up an ODBC data source, mark the Do not create a data source option.
It’s very handy (and recommended too) to create the ODBC DSN thru’ GP Installation, when we install GP on a 64 Bit System. We all know that GP is a 32 Bit Application. When we install GP on 64 Bit System, it gets installed with 32 Bit Compatibility.
Typically, on a 64 Bit System there are two ODBC Data Source Maintenance wizards available. One is for 64 Bit and other for 32 Bit. What you open from Control Panel -> Administrative Tools (or Start -> Run -> ODBCAD32.exe), is nothing but default 64 Bit ODBC DSN Maintenance wizard.
If you manually create a System DSN for GP, GP Application does not recognize this DSN at all. We have to actually create a System DSN for GP in 32 Bit ODBC DSN Maintenance wizard, which is accessible from the following path:
We have to explicitly open this application from the above path and create System DSN for GP there.
Trust me, both look exactly the same. Application Name ODBCAD32.EXE is also the same for both. But location & compatibility factor is different.
In case, you are stranded when your ODBC DSN is not listed in GP’s Welcome Screen Server Dropdown, on a 64 Bit System, rest assured that you have not created DSN on the correct DSN Maintenance wizard.