After installing a new Windows 2008 server with the name TESTSERVER2 and modifying %windir%\system32\drivers\etc\hosts or adding a DNS CNAME/A entry for TESTSERVER, you get the following error when trying to connect to \\TESTSERVER:
"You were not connected because a duplicate name exists on the network, Go to System in Control Panel to change the computer name and try again".
On the new Windows 2008 server (TESTSERVER2):
Microsoft Windows 2008
Microsoft Windows 2008 R2