I'm pretty sure you can use either the server name or IP address in the ODBC (Aaron - can you confirm that there is no reason why you can't use IP?) - as long as its the same on all workstations - either all IP or all server name. Ideally you should use a System DSN everywhere (the User DSN will work - but can cause issues with the advanced SQL options (on the GP user set up window). If users can't see the System DSN you set up - grant security rights to it under regedit.(do a search for all instances of the System DSN name in the registry- right click it and select security...and grand full read/write access to the user group).
There is a script you can download to capture the SQL logins when setting up your test environment - but the user passwords will always have to change because the server name changes. Just set them all to 'Password1' and select 'Change password at next login'.
Ian.