Correct, it uses it's own database from the server side code which isn't allowed in a Sandbox environment.
I have been thinking about how to change to run in a Sandbox environment, and have come up with several approaches such as moving the database to SQL Azure (still a problem with access from server side code) to storing all the data in SharePoint lists (where
you have access permissions and capacity planning issues).
It's not an easy thing to do and I haven't come up with a definite plan, and certainly haven't got any timescales. It's a big job though.