Crystal 2011 connection issue with Windows 7

I just upgraded from Windows XP to Windows 7Pro 32-bit and installed Crystal 2011.

I created the ODBC connection in Administrative Tools using SQL Server Native Client 10.0 and it tested successfully.

If I open Crystal Reports, then open a file, it connects with no problem.

If I double click on the file to open Crystal, when it tries to connect to the database, I am prompted to enter a user id and then get a logon failed error that says Details: IM004[Microsoft][ODBC Driver Manager] Driver's SQLAllocHandle on SQL_HANDL_ENV failed.

Any idea why it connects without any prompts when opening Crystal first and then the file, but not when double clicking the file to open it?

I never had this problem with Windows XP.

Thanks for any help with this.