After attempting for an hour or so to get the SSO service running on a MOSS system in a local machine (non Active Directory) environment, I discovered a couple of posts and some documentation from Microsoft which indicated that for the SSO service to be used with SharePoint/MOSS, the system must be integrated into an Active Directory system.
The problems come when you try to configure the SSO service in Central Admin, on the screen where you enter the Administration and Management credentials for the SSO service, when clicking OK here, you get presented with the Unknown Error Occurred or Access Denied error messages.
platinumdogs.me 
Posting the links to these articles and posts would have been nice.
Yeah I agree, sorry I’ve mislaid the links themselves but the articles I mention were Technet MOSS Single Sign-On articles combined with my own experience.
There are plenty of links on my blog and the web to Technet SSO articles, the only problem with the Technet articles with regard to SSO is that they require very careful reading IMHU.