MySQL Problems

I've got a weird thing going on here and am in need of some help. SLES11 SP1 and i install mysql from the SLES11 SP1 DVD, so far no problems. I create a root password and login, no problems. Then we have a server that uses phpMyAdmin and that is how we access mysql (the mysql server and phpmyadmin are different servers). So i grant all privileges on *.* to root@`%` identified by 'password'; so the phpmyadmin server can access the DB's, here is the problem=can't access anything just keeps prompting for the password. I can login on the mysql server using root and password for root. So i import the main DB (website) using mysql, no problems. Now the phpmyadmin server is also the website server so, still when going to the website, you get an error about connecting to the mysql DB, problem! I show grants on the mysql server and see what appears to be correct. So, i think i should revoke the grant and re-grant=problem, the revoke never revokes the initial grant. I uninstall mysql and reinstall=same problem. I uninstall and rename the /var/lib/mysql folder and then reinstall mysql using the sles11 dvd, only the /var/lib/mysql folder does not get created and that causes all kinds of problems!! So, how does the /var/lib/mysql folder get created to begin with? Should i use a 5.5 rpm from mysql.com or is there a repository i can use for sles11?

OK, i now see mysql folder after starting mysql and viewing hidden files (i guess the folder did not reload but now it has).