Access denied after installation
Thank you to Alyssa Gono for solving this. She did it in a comment, so I can't formally credit her with the correct answer. But I'll lay out here what happened.

I thought at first that couldn't be it. How could a cookie be interfering with the analysis of the login credentials? But I was so frustrated by this problem that I decided to give it a try. I work in Firefox, so first I loaded IE, and logged in there, and it worked! Then I went back to Firefox and looked at my cookies. Rather than deleting them all, I looked for cookies from localhost. There were about 20 of them. I deleted those and bam! I was able to log in!

This was with the credentials "hello" and "there" set in the update above. So next I undid the changes described in that update by resetting the credentials back to the intended ones. Went back to the site, logged out and logged back in with those credentials and Wow! Problem solved.

Now I can finally get to work on developing my sites.

I'm going to submit a bug report at Drupal because it would be helpful if the sw could let the user know that a cookie is blocking the login. If it can't detect that, at least it would be helpful to suggest clearing cookies if one believes the login should be working and isn't.

Can someone explain how it is that a cookie interferes with the analysis of the login credentials?

Thank you again to Alyssa.