First of all, why use a complicated thing like
Tomcat to
test your
JDBC connections? Do it the simple way first: write a plain old
Java application which does nothing but make a JDBC connection. When you have that working and you have identified the correct setup parameters, then you can plug those into Tomcat.
And I have to say I'm very dubious about this NTLM idea. I switched to using the JTDS driver for SQL Server specifically to avoid that message about encryption being required on the connection, I got that message from Microsoft's driver but not from JTDS. And I don't use NTLM to connect in any way, I just configured the user ID and password the same way you did and made sure that SQL Server was configured to accept connections via IP.