The two connections files shouldn't cause problems. The PowerCMS one is just used for power cms and you shouldn't need to access it. If you want to put a copy in the root so you can use it that would be fine, but I don't think that is the problem.
Export and send me a fresh copy of your site definition. Then tell me the page and database table you are trying to add the update to and I'll see if I can reproduce and debug the error.