Hi Peter,
Like I said im not much of a SQL person, but I believe I do have rights. Its a test environment so I just use the domain admin account of "Administrator". I added the SCCM2012 machine account to the SQL local admins.
I did use an alternate method to get SCCM 2012 going, and that was to have SQL and SCCM 2012 on the same machine. After a few tweaks with SQL Server service this started working.