Sounds like you have not defined your site and testing server in dreamweaver.
Try following the steps described in this tutorial - http://www.adobe.com/devnet/dreamweaver/articles/first_cs4_website_pt1.html.
I have defined the site: C:\xampp\htdocs\mysite\httpdocs\ ( this is the structure used by the host for the live site - public_html = httpdocs)
And testing server: C:\xampp\htdocs\mysite\httpdocs\
URL testing prefex: h t t p://localhost/mysite/
I have set up and run numerous sites w/ Dreamweaver but not used Live Site before - I don't believe it's a problem with the the site configuration, and aftere setting up a connection test, I do conect to the database with these parameters.
That solved the problem. I figured it was something very simple that I just couldn't see.