Password mismatch while logging to sql server
The only times I have ever seen the State 8 error for 18456 (Password Mismatch) was in fact a password mismatch. Try a new password. Type it in notepad, copy and paste it to SQL and then do the same into your app config. Make sure nothing is happening to that password when it is being handed off to SQL - no trimming, extra spaces, etc.

But then the second error you got seems to indicate you may have gotten past that bad password error and are now unable to access your database.

That can be one of a few things:

1.) Verify the database specified really does exist.
2.) Verify that the login you are using has been granted appropriate permissions into that database (If the permissions are at the SQL Server system administrator level then this shouldn't be a necessary step)

That's where I'd start anyway.