If this is for Sql server, then you shouldn't copy the file to you local folder - it should be where the SQL server instance can get hold of it - which may not be on the same machine as your local web site (or even have any access to you local web site machine). You should create the database in SQL server on the instance the web site will be using.
Alternativley, the easier way to do all this is to use an access database and follow this tutorial:
Introduction to Membership[
^] which take you through the process very quickly.