It seems the shown message is incorrect. I faced the same issue a while ago, and if I am not mistaken the issue was resolved by using a working ODBC.

Correct 

I managed to resolve after posting. 
the problem now in database set up after setting vault credentials login as admin password admin takes me in asks me to change password with stronger password but keeps saying old password incorrect but I can get in to database set up using it. Not sure now what to do 

Hi , It most probably is due to the minimum password age setting in local security policy. Change the minimum password age to 0, and you should be able to change password successfully. When you just installed Sage 300, the password is 0 days old in age.

If these are set by Domain Group Policy, will this make the change for everyone - not just those using Sage??

You can deselect enforce password policy or enforce password expiration in SQL under the individual logins that are created for each Sage user as ##S_LOGIN...

What is doing the enforce password policy option? I have deselected that option for a user, but still a complex password is required for that user.

What is doing the enforce password policy option? I have deselected that option for a user, but still a complex password is required for that user.

Complex passwords are still required by the Sage application. Deselecting that option unlinks the sage users from the windows policy.