I've just set out to creating my first RoR project, using MySQL. Obviously after the first visit to browser the site informed me about not being able to connect to the DB with the current settings. I've quickly updated them in the config/database.yml, however it still complained about the old settings.
Eventually, it updated and was working fine, but I'm sure there's a cache somewhere that could have been cleared to make this less of a nuisance.
I have commented it earlier, Now adding it to my answer ;)
It seems like you have not restarted the server after done the changes in database.yml. Because, database.yml is being loaded once at the time of server start-up. So please try with restarting your rails server.
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