kratos-iii:railsproj zachinglis$ rake db:create
(in /Users/zachinglis/Sites/rails/railsproj)
Couldn't create database for {"adapter"=>"mysql", "host"=>"localhost", "username"=>"root", "password"=>nil, "database"=>"railsproj_development"}, charset: utf8, collation: utf8_general_ci (if you set the charset manually, make sure you have a matching collation)
I had no issues using Sequel Pro and even creating said database.
How do I resolve this? Having an empty password never gave me issues before. And I really doubt thats it.
I was having the same problem than you, me and my friends were all going mad because of it, until we've found this link http://weblog.rubyonrails.org/2009/8/30/upgrading-to-snow-leopard
I've just followed the mysql installation steps and it worked great here :]