You got some lines in there that should of been left alone.
<tcp ip="localhost" port="9000" telnet="disable"/> (not 3306)
In the following, if your planning on connecting to the eqemulator.net
Not sure why you have a user name and password in there. I left mine
blank to connect.
<!-- Loginserver information. Defaults shown -->
<loginserver>
<host>eqemulator.net</host>
<port>5998</port>
<account>sandbox</account>
<password>MyPassword</password>
</loginserver>
Under your <database> make sure the actual name of the database
is entered there (most call it peq.)