I had a little problem with my config.php generation, in the end I had to manually edit it myself.
Basically I put in some info, but missed a few permissions (didn't realise this at first) and then changed the password as it errored out on the step after it made the config.php. I then reran the section which generates the config and it said it was ok, but I got the same mysql unable to connect error. It later turned out that it wasn't re-generating the config.php file.
This is with RC1 - should be pretty simple to reproduce.