In the PHP.INI (php folder on IIS server) file uncomment the php_mysqli.dll and php_mysql.dll (remove the semi-colon in front of them).
Make a php info file (google it, just a few lines of code in a stand alone page) and go view it on a browser, it will tell you what is running or not. MySQL should be running now (WP will tell it what to connect to later)
Load MySQL Administrator (from the main mysql site) on the machine with PHP and try to connect to the sql server. Whatever name it takes to resolve and connect is the name WP will use ok. 3306 is the default port for a TCP/IP connection... maybe security is on the server with sql, maybe sql is configured to not accept connections or something (not to sure... ours is all local and works so I didnt mess with it much).
Hope that helps. I am running IIS6/PHP ISAPI, MySQL, and WP 2.1/K2 Theme if you need something let me know.
-s