Why does a parameterized query produces vastly slower query plan vs non-parameterized query?

It appears that the query planner has made a decision in the literal query which is based upon information that it already has. It would have statistics which it can query efficiently based on the spread of data given in your specific literal.

Your starting point should be the SQL profiler. Run both through the profiler, and see what the query plan is in each case... then update the question to describe the two plans.

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