This is the exact reason you should be using parameterized SQL so regardless of the date format this would not be an issue. See http://www.daniweb.com/forums/post811239-3.html for an example.
But to answer your question -- I have looked around myself and can't see a single setting where this would be changed system wide. More than likely, knowing microsoft, it defaulted a setting deep in SQL Server at installation time that will be next to impossible to find.
One solution may be to call SET DATEFORMAT MDY when you open up your connection, if you have a common method in your application for doing so. You're right that this is an SQL Server problem, but I think it looks like a back-handed asp.net fix. Other solutions I have seen are using ODBC drivers to connect to SQL Server to get around the locale settings, but that sounds worse than the problem.
Good luck :(