Grids and Graticules Layers can be created in a SQL Server Express database. However, if the connection to the database is through the Database Servers option, the output from the Make Grids and Graticules Layers geoprocessing tool cannot be saved to this database.
This is a known limitation at ArcGIS 10.
Make a spatial database connection to the database through Database Connections instead of using the Database Servers connection.
- Connect to the SQL Express service.
- Right-click on the database.
- Click Save Connection.
- Expand the Database Connections tree-view. Use the connection that was just saved to access the database.