I've run into similar issue. I configured SA 5.5.04 as
service in system account that interact with the desktop and
has the following parameters -m -n ht_hittester sample.db -x
NamedPipes. I use ODBC API connecting from my application
(C++, run as service with user account). Everything run
fine until I installed the hotfix Q328310 security patch.
Once this hotfix installed, I've encounter database error;
"Unable to connect to database server: unable to start
database engine".

Then I follow your advice and installed the latest patch.
It is now run with SA 5.5.05 build 2817. Unfortunately I've
encounter a different problem which you've stated in your
message; "invalid database engine command line".

Any advice and suggestion is very appreciated.

Thanks in advance,
....Van