Do you have MySql administrator installed on your machine? If you do, go to: Start > All Programs > MySql > MySql Administrator -
You should get a login screen. Can you log in with your correct info here? If you can log in here, then the problem is with Dreamweaver, and (if it were me) I would be inclined to delete the connection folder from my site, close Dreamweaver, delete the cache file (again) and create a new connection. Totally irrational, but that's how I bumble about doing stuff.
You could try reconfiguring your MySql instance:
C:\Program Files\MySQL\MySQL Server 5.1\bin\MySQLInstanceConfig.exe (You'd need to check for the exact path and MySql version in your machine.)
I'm groping around in the dark, here.