SDE connections never complete after 10.2.1. install

After upgrading from 10.1 to 10.2.1, everything seems to work fine, except for our SDE database connections. The connection just spins the hourglass, and never connects. An uninstall of 10.2.1 and reinstall of 10.1 allows the connections to work just fine. I have tested this on multiple machines (Win 7 sp1), connecting to sql server 2008 r2 database (10.1) on a windows 2003 server and to a sql server database r2 (10.1) on a windows 2008 server. Both connections never complete from 10.2.1, but are fine from 10.1.

I have tried upgrading from 10.1 to 10.2.1
I have uninstalled 10.1 before installing 10.2.1.
I have tried renaming the ESRI folders in the APPDATA folder.
I have installed updated dbms files.

Any ideas/suggestions on what to look at to get these connections working?