I would guess that it might be a total connection fail. I know it says 'EOF' but sometimes error messages like that are misleading.
I'd see if you can ping the host firstly from where you are running the script.
Secondly I'd see if you can get a tcp connection on the port you're using.
I've heard of EOF errors on http connections, when you connect with https to an http port. I'm not sure if that applies here.
This came up on google. It might help:
http://sourceforge.net/projects/pymssql/forums/forum/124111/topic/1672338
If all of the above is working, I'd double check the username and password are correct; perhaps even create a new user.
Finally, I'd check to see if the client library and the server library versions are compatible.
I hope this helps.