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If Tools does work, perhaps you should copy the Connect String from the Tools CFG, or copy the local database to the Siebel Client directory.
ConnectString = C:\Apps\Siebel\Client\SIA81\local\sse_data.dbf -m -x NONE -gp 4096 -c256m -ch256m
ConnectString = C:\Apps\Siebel\Tools\SIA81\local\sse_data.dbf -m -x NONE -gp 4096 -c256m -ch256m
Copy it to where?
Never mind. I copied from tools to client and they still didn't resolve the issue. However, I had to copy the entire tools. cfg file and not only the connect string.