I have now fixed my problem which was that I deleted an old database, which was still referenced in the sql.ini file. Once I removed the dbname line from sql.ini it became a happy little camper again.
I also have this problem. I have found some info on this link that may be helpful to you. However it hasn't helped me because when I try the set server command I get an "error: cannot connect"
http://www.papergate.com/white_papers/gupta_repair.html
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