It appears there is a bug with the database configuration window and MySQL databases.
The password field has a comment in it “leave it blank for no changes”. If you accidently hit save, it appears it stores a blank password and the connections start to fail when you generate the application. So even though it says leave it blank, ScriptCase is overlaying it with a blank password.
I think you should disable the save buttons until something on the window changes, then the password will not be overlayed.