Hey, thanks for the replies.
We get prompted for the password even with that database login included, and valid data still says login failed. However this same error happens when using the report designers pc, so it cannot be the datasource, the report works fine in the preview window of Visual Studio, so it can connect without a problem,
I have actually partially solved this, by removing the datasource from the report, and creating a data table in visual studio that contains all the columns returned (we use procedures to get the data), and then using MySqlConnection and MySqlDataAdapter to fill that dataset from the procedure.
This seems to avoid the issue, however i still have no idea what is actually causing the original problem.