Can't connect from localhost with 4.1.1 alpha

[sowbug]

I can connect from SQLYog,MySqlCC, jdbc from remote with no problem.
However, when I try to connect(mysql -u root) from localhost, then I
get access denied. Checked the user table and root can connect from
anywhere(%).

I am running 4.1.1 alpha on Red Hat with the --old-password option.
TIA.

sow