Brian Knight just did a blog post about how, with SQL Server 2005, using (local) for the server name in a connection times out. Now, his post specifically deals with DTS/SSIS, but his discovery about why is times out, (local) uses named pipes which is disabled by default in SQL Server 2005, is interesting when discussing Linq To SQL. The SQL Server team is disabling protocols to try to make SQL Server more secure, while a the same time the Linq To SQL team has designed Linq To SQL to ONLY use Named Pipes to connect to SQL Server. So while one team is attempting to close a door another is forcing that door to be open. Then again, maybe the SQL Server team doesn't like Linq To SQL, like most DBA's based on my reading, and shut the door for this reason.
Another note is that SSDS (SQL Server Data Services or SQL Server on the Cloud) requires developers to use Linq. As referenced in Andy Warren's It Depends blog.