Are you able to connect to that database from a mysql command prompt. When you install mysql there is one exe installed that allows you to connect to the mysql server directly from a command prompt. If you can use that then we can get more info if the username/password are being accepted properly.
Not exactly sure where it's been installed at, but if you open up a command window and CD into the directory that the mysql utilities were installed then you should be able to type:
mysql.exe databasename -uyourusername -p
Change databasename to the actual name of your database. yourusername will be the user you setup. At that point it should prompt you for a password. If it allows you in then that verifies that the username/password were setup correctly. If not, then we not it's something in that area.
And for the database server you should probably use the IP address of your server.
