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That message sounds like it's not actually using local HSQL at all, but is trying to connect to an external AgileTrack server. The database connection modules have been reworked, and it's pointed out that the settings aren't working properly. I'm able to reproduce some of the problems and I'm going to put out a fix probably in a day or two.
I am having a similar problem, I am able to login with admin and admin as the password but I am not able to login with any of my created user accounts. I have set these users to be admins.
Regards,
Could you please provide more information about your settings? MySQL (which version) or HSQL? Is it a direct database connection or is it using a JSON-RPC or XML-RPC connection to a server? Are any errors being logged to the log file?
Thanks.