Thinking about how to make the connection secure, by which I take you mean the connection string is obfuscated in some way, I came up with the following idea. Not tested, so have no idea if it would work, and is probably more complicated than needs be!

1. Create a SQLite database that has just one table and for security about 5 fields.
..... Field 1 contains an encrypted form of the connection path details.
..... Field 2 ........   contains the encryption key spread across one or more fields, the other fields  contain dummy information and or the password
.

2. Before opening the SQL Server connection as demonstrated above, read in the SQLite database contents and perform the deincryption.

3. Parse the results into the actual  db_settings:='Provider=SQLOLEDB;Server=localhost;database=DatabaseName;UID=UserName;PWD=password';
 
To make it more secure, a function could be written that actually changes the encryption key (some sort of randomise function) each time the program is run, This could be placed on the MainForms OnClose event where the new encrypted path and key can be written back to the database. I assume the SQL Server DB would be disconnected at this point as well.

I've probably over thought this far more than is necessary, but if it worked, this idea could also be used for other settings in the ini file such as column widths in tablegrids etc.

The other option would be to have the encryption or password key in plain sight, but looking like an encrypted  string.

Only to prevent that your software will be unsafe and funny for security features. Not as "support".

Will not realy work
- .dcu file is a scripted code. Easy to reverse. even a full compiled .exe can be reveresd by some freeware reverser.
- encryption with RC5 has some issues with sqlite text storing. The character table is not constant utf, so it can happen that you can not decrypt what you have encrypted.
- it is allways a bad idea to store connection passwords in a sourcecode, ini file or database without a propper encryption and other safety elements.

Except script kiddis and beginner in programming others will break the security before breakfast just as a morning exercise.

Before you ask: MVD is abandon by the last statement of Dmitry. There are solutions possible, but I support only active compiler. Search for me in other forums and you will see how to make it. (have fun searching).

1. Create a SQLite database that has just one table and for security about 5 fields.
..... Field 1 contains an encrypted form of the connection path details.
..... Field 2 ........   contains the encryption key spread across one or more fields, the other fields  contain dummy information and or the password
.

2. Before opening the SQL Server connection as demonstrated above, read in the SQLite database contents and perform the deincryption.

3. Parse the results into the actual  db_settings:='Provider=SQLOLEDB;Server=localhost;database=DatabaseName;UID=UserName;PWD=password';
 
To make it more secure, a function could be written that actually changes the encryption key (some sort of randomise function) each time the program is run, This could be placed on the MainForms OnClose event where the new encrypted path and key can be written back to the database. I assume the SQL Server DB would be disconnected at this point as well.

I've probably over thought this far more than is necessary, but if it worked, this idea could also be used for other settings in the ini file such as column widths in tablegrids etc.

The other option would be to have the encryption or password key in plain sight, but looking like an encrypted  string.

Is there a more secure way to connect to a SQL Server, everything is readable in the script file. Could it be possible to connect using ODBC connection directly so it is not hard coded?

Here's my way of adding security to it. I think direct ODBC connection is not possible in Pascal Script.

  i,j: int;
var NxTextColumn: TNxTextColumn;
begin
   {***  create database objects ****  }
   Conn :=createoleobject('ADODB.Connection') ; //
   rs := createoleobject('ADODB.recordset');

   {** open database connection ***  }
  db_settings:='Provider=SQLOLEDB;Server=localhost;database=DatabaseName;UID=UserName;PWD=password';    //connection to database
   Conn.Open(db_settings);    //connection to database

   { query to get data}
   rs.Open  ('Select name,dob,address from tablename', Conn); // sql query

    //create table information
    try frm_main.TableGrid1.Columns.Clear; except end;
    try frm_main.TableGrid1.Columns.Add(TNxTextColumn); except end;
    try frm_main.TableGrid1.Columns.Add(TNxTextColumn); except end;
    try frm_main.TableGrid1.Columns.Add(TNxTextColumn); except end;

    //header name
    frm_main.TableGrid1.Columns[0].Header.Caption := 'Name';
    frm_main.TableGrid1.Columns[1].Header.Caption := 'DateofBirth';
    frm_main.TableGrid1.Columns[2].Header.Caption := 'Address';

   //initialized i
   i:=0;

   //while loop to get data from db
   while not rs.Eof do
    begin

        Application.ProcessMessages;

         //retrieve data and stored them in variables
         a:= trim(rs.Fields['Name']);
         b:= trim(rs.Fields['dob']);
         c:=trim(rs.Fields['Address']);

        //generate the data in Table Grid
        frm_main.TableGrid1.AddRow(1);
        frm_main.TableGrid1.Cells[0,i]:=a;
        frm_main.TableGrid1.Cells[1,i]:= b;
        frm_main.TableGrid1.Cells[2,i]:=c;

        i:=i+1; //increment i
        rs.movenext ;   //next record
    end;
 
     //close connection
     rs.Close;
     Conn.Close;

end;