I had a similar problem, and re-installing did not help. In the end i had to temporarily set the mysql root users password to an empty string. Then i started the install from scratch again and it worked fine.
FYI, the neccessary SQL on my Debian/sarge box was:
update user set password='' where user='root' and host='localhost';
I would recommend setting this back to a sane and secure value afterwards. You'll also need to edit the ispconfig files to reflect this change.