This is an issue with the Testing Server settings in the Site Definition.
Where you are trying to connect tot he remote MySQL server, set the testing server to use FTP.
And if the ftp connection is made to a folder under the site files root, make sure to enter the correct root directory, for example it may be:
on testing the FTP info you sent in file zilla, it says:
"Please note: files for your website must be stored under the htdocs directory."
so it looks like the root directory in your case should be:
Also make sure the URL Prefix is entered correctly.