I am going to generate 32-bit encryption key with combination of any
number of characters. what data type and its size should I use for
that on MS SQL 2005? will it be nvarchar(max) or nvarchar(4000)
appropriate to use? thanks!

You can use BINARY(4) if the key is always 32-bit. If it will vary then
maybe VARBINARY(4) will be better.

HTH,

Plamen Ratchev
http://www.SQLStudio.com