After much searching I found that the default Membership Provider specified in machine.config (c:\windows\Microsoft.NET\Framework\v2.0.50727\CONFIG) was always pointing to a SQL Server running on the localhost.
Instead of modifying machine.config there is a way to set it up in the projects web.config:
1) Setup the connection string to the remote database
<connectionStrings>
<add name="aspnet_membership" connectionString="<your_connection_string>"/>
</connectionStrings>
2) In <system.web>
redefine the default provider:
<membership>
<providers>
<remove name="AspNetSqlMembershipProvider"/>
<add name="AspNetSqlMembershipProvider"
type="System.Web.Security.SqlMembershipProvider, System.Web, Version=2.0.0.0, Culture=neutral, PublicKeyToken=b03f5f7f11d50a3a"
connectionStringName="aspnet_membership"
enablePasswordRetrieval="false"
enablePasswordReset="true"
requiresQuestionAndAnswer="true"
applicationName="/"
requiresUniqueEmail="false"
passwordFormat="Hashed"
maxInvalidPasswordAttempts="5"
minRequiredPasswordLength="7"
minRequiredNonalphanumericCharacters="1"
passwordAttemptWindow="10"
passwordStrengthRegularExpression=""/>
</providers>
</membership>
The <remove name="AspNetSqlMembershipProvider"/>
is key! All the other key/values were taken directly from machine.config