UBB.threads doesn't need it's own database, just one that it has permissions to connect to and perform the necessary actions, creates, inserts, updates, etc.
It could be a number of things. It could be that the username/password specified doesn't have permission to access the database from the server UBB.threads is running on.
Using the default table name prefix should be fine. That only needs to be changed if a second copy of UBB.threads is being installed on the same database.
Are you trying to connect to a sql server on localhost or is it on another server? Any one of the 4 fields being wrong will give an error, but at this point it sounds like it just can't connect to the database at all. So, it could be the database server or database name being wrong.