I feel kind of silly now. My fix was posted on here earlier.. by me
I spent way too much time on this issue this time around.
Nobody from VEEAM really addressed my fix and questions from a year ago in this post. The SQL Checker script starts out with a SC command to enumerate the SQL instances on the remote SQL server. The problem is, to run a SC command against a remote server, the account being used has to be a local admin on that remote server. In our case, we run the script using a service account specifically created as a VEEAM backup service account. It is a domain account. It has admin rights on the VEEAM server and the VEEAM services run as it. BUT, it DOES NOT have admin rights on all our SQL servers. So even though you go through and give this service account public permissions on all the databases on the remote SQL server, it doesn't ever even get to the point of being able to check those databases. It fails immediately due to not having permissions to figure out what SQL instances are there because the SC command cannot be run with your VEEAM service account.
This is true whether you use the SQL authentication method or Windows authentication method in the manual. My only way to get this to work was to specify everything, and instead of just using "%log_path% %vm_ip% username password, I used "%log_path% %vm_ip%\mssqlserver" (I am using the VEEAM service account so no need to specify the username password as that's implied. If you were using a different account or SQL auth you would fill those in)
The other option to get this to all work is to either add your VEEAM service account (or whatever account you are using to run your script) to the local admin group of every SQL server you want to run the script against. Or if the account you are using is a member of domain admins it will work as well.
I think this is important info missing from the manual. It's possible I could be wrong and missing something here. But as far as I can tell, unless the account you are using to run the script is a local admin of the SQL server or a domain admin overall, the script will always fail trying to run the initial SC command to poll the SQL instances unless you manually specify the instance name, even if it is just a default instance.