yes the web.config file reads ok, I have double checked it with the code I included with the tutorial.
It possibly could be related to SQL Server 2008
Where you have
Data Source=.\SQLExpress;
You could do with checking the name of your SQL Server 2008 and seeing if it is different to the SQLExpress name in the connection string.
When you first open SQL Server Management Studio Express, the connect to server window pops up, check the name of Server Name:
Here is an example, first part is name of computer, second part is name of server
LEE-XPPRO-VWD-L\SQLEXPRESS