I’m not sure precisely what the problem is, but is the SQL Server on the same machine as your KNIME Analytics Platform? The reason I ask is that 127.0.0.1 is, I think, a loopback connection, so it would only work for a machine to talk to itself. If you are looking to connect with a different computer, you will need to configure it differently. If you have an IT department, you probably should ask them for help.
If, on the other hand, both are running on your computer, then it’s not so clear, but it appears to be an issue at the Internet layer. Can you connect independent of KNIME?