If you've gone through the trouble of creating a BizTalk service user and granted proper permissions on the system, then you may also need to grant DB permissions in SQL Server unless you've taken care of that with the appropriate group.
- Are you using the Visual Studio 2005 version of SQL Express or did you install Standard or Enterprise?
- Is this installed on Windows Server 2003 or on XP where you'll need to connect your DB to an external BizTalk Server?
Please, describe your installation scenario if you haven't found a solution and I'm sure someone will have the answer.