After creating a new project with the Project Manager, the first time you access it, Sitefinity will guide you through a couple of steps for setting up the database. In the first step, choose the type of database that you are using, and then sitefinity will ask you to fill in the server name, username and password. In the Server textbox, just enter the name of the machine that your database resides on. Then enter username, password, and the name of the database itself. Sitefinity will create the connection string automatically.
After that you shouldn't have any problems.
What exactly do you have in mind for the images? We recommend using relative paths to them (beginning with ~/).
the telerik team