Seems to me that you've got a problem with having a PHP version, which does not support the authentication protocol/password hashing required by the MySQL server, probably because your MySQL db is on version 4.1.1 or higher...
I suggest you either follow the advice of the following link or downgrade your version of MySQL (er, 4.1 probably works well)... Not really the fault of Pear that MySQL would change a few things around.
"Note for PHP users: The mysql extension does not support the new authentication protocol in MySQL 4.1.1 and higher. This is true regardless of the PHP version being used. If you wish to use the mysql extension with MySQL 4.1 or newer, you will need to follow one of the options discussed above for configuring MySQL to work with old clients. The mysqli extension (stands for "MySQL, Improved"; new in PHP 5) is compatible with the improved password hashing employed in MySQL 4.1 and higher, and no special configuration of MySQL need be done in order to use this newer MySQL client library for PHP. For more information about the mysqli extension, see http://php.net/mysqli.
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