PHPMyAdmin Error #1045 - Access denied for user 'root'@'localhost' (using password: YES)

I just installed mysql 5.0 and newest phpmyadmin and get:
PHPMyAdmin #1045 - Access denied for user 'root'@'localhost' (using password: YES)

From a command line i did mysql -u root -p and was prompted for password, i entered it and it accepted. so the root pass is fine..

in phpmyadmin i'm using
$cfg['Servers'][$i]['auth_type'] = 'config';
$cfg['Servers'][$i]['username'] = 'root';
$cfg['Servers'][$i]['password'] = 'mypass';

but phpmyadmin is giving the 1045 error.

I tried doing this:

mysql> UPDATE mysql.user SET Password=PASSWORD('newpwd')
    ->                   WHERE User='root';
mysql> FLUSH PRIVILEGES;

and although it gave all 'OK' messages, i'm still not getting in thru phpmyadmin