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**This issue has been resolved in ArcGIS 9.3.1 Service Pack 2.**
When attempting to make a connection from a 9.3x ArcGIS client to a 10 ArcSDE geodatabase, an incorrect and misleading error message is returned: "Please run the ArcSDE setup utility using the -o install option."
This error message is misleading because the geodatabase is already at version 10, and therefore nothing needs to be installed.
The error message is incorrect. Connecting to a 10 ArcSDE geodatabase from a pre-10 ArcGIS client is not supported at this time.