I recently installed MySQL 5 on Windows 2003 and tried configuring an instance. Everything worked fine until I got to "Applying Security settings", at which point it gave me the above error (Can't connect to MySQL server on 'localhost' (10061)).
I do have a port 3306 exception in my firewall for 'MySQL Server'.
You'll probably have to grant 'localhost' privileges to on the table to the user. See the 'GRANT' syntax documentation. Here's an example (from some C source).
"GRANT ALL PRIVILEGES ON %s.* TO '%s'@'localhost' IDENTIFIED BY '%s'";
That's the most common access problem with MySQL.
Other than that, you might check that the user you have defined to create your instance has full privileges, else the user cannot grant privileges.
Also, make sure the mysql service is started.
Make sure you don't have a third party firewall or Internet security service turned on.
Beyond that, there's several pages of the MySQL forum devoted to this: http://forums.mysql.com/read.php?11,9293,9609#msg-9609
Try reading that.