I have the following connection string:
Data Source=Paul-HP\\MYDB;Initial Catalog=MyMSDBSQL;Persist Security Info=True;User ID=sa;Password=password
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You have a number of options - the ones that I am aware of (in order of preference):
So for example the connection string might look like this:
Data Source=Paul-HP\MYDB;Initial Catalog=MyMSDBSQL;Persist Security Info=True;User ID={0};Password={1}
I'd go for option 1, if thats not possible then option 2. I've mentioned option 3 for completeness.
Have you read Protecting Connection Information (ADO.NET)?