Unable to edit database - first content area with PCMS

Hi there,
I'm trying to use Power CMS for the first time and I've read similar threads about solving this problem, but I can't work it out.

I have made my connection to the database with a testing server. all ok.
Then, I try to add the first content area in POwerCMS and it gives me an error message
"unable to edit database with provided uer credentials" etc etc.
I have checked and user access is all privelages. so ok.
Looking at other threads, this may be an issue with the testing server set up. But I can't see where. I am attaching a zip file of these settings, in the hope that you can please point me in the right direction.

Thanks very much in advance.