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The problem is as follows:

I have 2 windows2003 server instances running on the cloud.

1) How can I create a local area network from these 2 instances?

2) Assuming that I want to create a VPN network from these 2 instances, how do I do that?

(I'm not very good in networking, therefor the above problem description might be incomplete or not very clear.)

A detailed answer or clarification would be praised and appreciated!

What I tried:

1) Setting up OpenVPN, but I got lost in the process.
2) Creating a VPN from windows2003 server in the following manner:
on instance a):
set up a dhcp server;
set up an "accept income vpn" connection; with the followin tcp ip settings: obtain an ip from the dhcp server;

on instance b):
created a new vpn connection, tried to connect to intance A, using the instance A static IP but error 806 was thrown, something relate to a GRE protocol.

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It will be very helpful to help you on your question, to get a little more information on your end result. What you will like to accomplish? You mention VPN between the two instances, but it sound more like a tunnel. – Geo Jun 10 '09 at 13:59

If you really want to VPN between the machines I would recommend using Routing and Remote Access (RRAS) within Server 2003. You can find many config guides on this.

The issue you will have with the VPN approach though is that each machine is really an 'island' - ie. it's a single IP address and not a whole private network (the PN in VPN!). You may need to fake a LAN on each machine by using the MS Loopback adapter so that the remote machine gets an IP address on the same 'network' as the host it's VPNing to.

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For 1, you've already got a LAN between EC2 instances in the same "availability zone", just use the IP address that starts with 10 to talk to one another.

If you really want to have a VPN between the two, then yeah, OpenVPN is the way to go IMO. But then, I've never really played around with the built-in Windows VPN stuff, and I'm deeply familiar with OpenVPN.

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Use OpenVpn and OpenSwan (In case of IPSec ) or contact Kaavo

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