That license error means:
-97 The desired vendor daemon is down.
I would check a few things in your LMTOOLS.
1. Make sure your LMTOOLS is version 10.1.5. If you did not upgrade your License Manager to the 2006 version, it cannot read your 2006 license. You should also be on a Windows 2000 SP4, Windows XP, or Server 2003 system. Windows NT/9x is not supported.
2. Make sure you have a valid 2006 license, obviously. The Hostname and the Ethernet Address much match the license file exactly. Sometimes there are errors during the generation of this file, espcially if you try using the 'Network License Activation Utility.' You should get your license file from your reseller or Autodesk.
3. Make sure your have the following options checked on the Config Services tab: 'Start Server at Power Up' and 'Use Services.' Then go to the Start/Stop/Reread and start the service. Then you can check your Status Enquiry or debug.log file to see if it is working correctly.
Once you have verified all of these steps, you shouldn't have any more problems. If it still isn't resolved, you might consider posting your debug.log file here.