Foreign Data Wrappers & Windows Authentication
Ok, thanks to the guidance of the community I manage to got it to work... I believe its important for me to mention a few things you should take in account when attempting this (at least under the same environment I been trying).

My setup:


Ubuntu 14.04 &lt;-> PostgreSQL 9.3
Windows Server 2003 &lt;-> SQL Server 2005


Additional components:


SQL Alchemy 0.9.9 
Multicorn 1.1.0


Im not gonna go into details on how to install this components since there's plenty of documentation online.

Once this is setup I took a_horse_with_no_name advice on changing SQL Server authentication to mixed authentication and created a new account, for the sake of the example I use postgres:postgres. Additionaly still on SSMS I defined SELECT permissions for user postgres in the table I wanted to get the data from tblTest.

Back in my PostgreSQL I created a new database (pgTest) and setup multicorn:

CREATE EXTENSION multicorn;

Created the server for our FOREIGN DATA WRAPPER:

CREATE SERVER alchemy_srv FOREIGN DATA WRAPPER multicorn options (
    wrapper 'multicorn.sqlalchemyfdw.SqlAlchemyFdw'
);


And then (what it was supposed to be the last step) create the table that is going to get data from MS SQL Server:

CREATE FOREIGN TABLE pgTable (LogTime varchar, 
                              LogUser varchar, 
                              LogData varchar) 
server alchemy_srv OPTIONS   (tablename 'tblTest', 
                           db_url 'mssql+pymssql://postgres:postgres@10.0.0.0/RemoteDBName');


This shows no error, but once you throw a simple SELECT * FROM pgTable; I was getting the error I OP up there.

So I search a bit more and stumbled on this Google Groups posts labeled on a response as a BUG. 

One of the offered solutions is getting rid of pymssql, as in:

apt-get uninstall python-pymssql; pip install pymssql 

After this I tried again to create the table and getting data but nothing happened, i was just getting a blank table.

So I pip install pymssql --upgrade, once again create the table within PostgreSQL and voila! this time worked perfect.

Hopefully this will help someone else in the future, thanks for your guidance!