One of the nice features we have in the Advanced Developer Extensions for CRM4 (since sdk v4.0.12) was the ability to define the connection details inside the connectionStrings section in the web.config file. However, this facility was missing in the early versions of the CRM2011 SDK. However, the latest update of the CRM SDK (March) has finally included this feature. In fact, this is one of many extended set of features known as Developer Extensions (note the missing "Advanced" word from CRM4).
For instance, suppose you need to connect to a CRM 2011 server using Integrated security from a custom web project. First you have to define the CRM connection details inside the web.config (or app.config for other project types) as follows;