Quick note.
 

I was following the guide to setting up the server, and it wouldn't allow me to initiate the line GRANT ALL PRIVILEGES *.* '%"@localhost IDENTIFIED BY '%'. I tried everything, and nothing seem to work, when i typed it in I got a 1045 error. I found an alternate way to setting the root users password and username, it is as follows: (Open a DOS prompt)

C:\> C:\mysql\bin\mysql mysql
mysql> DELETE FROM user WHERE Host='localhost' AND User='';
mysql> QUIT
C:\> C:\mysql\bin\mysqladmin reload
C:\> C:\mysql\bin\mysqladmin -u root password your_password
Close it, now got back and put in the line:
mysql> grant all privileges on *.* to test@localhost identified by 'test' with grant option;

(replace the first test with your Username and replace the second test with your password)

( Thanks to Merth's guide for the grant privileges line =] )
Hope this helps, it helped me! Any questions message me!
Also note this was used on Windows XP Home Edition. ANd Using the latest MySQL.