To reaname the server machine:
   1. rename the machine
   2. update the changes in MS-SQL server

Part 1. [ Rename Machine ]
 You can't rename the machine with out admin password,
 so you have to first switch to the workgroup from domain
 in order to do so.

  a. Right click on 'My Computer' (make sure its not a 
     short-cut (by default it is under start button)
  b. Select 'properties'
  c. Select 'Computer Name' tab
  d. Run 'Network ID' wizard


Part 2. [ I followed this tutorial ]
URL: http://vyaskn.tripod.com/administration_faq.htm#q5

How to rename an SQL Server computer?

If you are running SQL Server 7.0, after renaming the SQL
Server 
machine, the SQL Server service will fail to start, with an
error message 
"Your installation was corrupted or had been tampered with.
To get around 
this problem, you have to rerun the SQL Server setup. Setup
will prompt 
you to upgrade. After doing so, the necessary SQL Server
registry 
entries will be reset with the new computer name. Now you
will be able to 
start SQL Server. After restarting, use Query Analyzer to 
run the 
following commands:

EXEC sp_dropserver 'Your_OLD_Computer_Name'
GO

EXEC sp_addserver 'Your_NEW_Computer_Name', 'local'
GO

Restart your SQL Server service. Connect using Query
Analyzer and run 
the following command (It should output the new server
name):

SELECT @@SERVERNAME
GO

If you are running SQL Server 2000, the new name is
recognized, the 
next time SQL Server service starts. You don't have to
rerun the setup. 
However, you have to run the sp_dropserver and sp_addserver
stored 
procedure as shown above