I have recently been diving into Flex, and found that to work with the ColdFusion Wizards to get a jump start on some code generation, I needed to have my RDS password.  Not really remembering what I may have set this up as on my localhost, I simply went into the admin and changed it.  Still that didn't work. 

Turned out that even though I could change the password, apparently I did not have RDS enabled at all.  It would be nice if the ColdFusion Admin indicated this in some way, instead of making you think all is good letting you change your password.

In any case, I finally figured out that you need to edit your web.xml file, typically found at your [cf install]\wwwroot\WEB-INF.

1) Backup your web.xml
2) Search for RDS - You'll find a commented out XML block. Uncomment.
3) Search again - there are two places. Uncomment.
4) Restart your ColdFusion Services

Finally, I'd like to add that for security purposes you really should not have RDS enabled on production servers.  By default I tend to not start them up at all, but for your localhost server its probably fine.  However, I'm sure there are some security risks even here.  Again, I'm kind of surprised there isn't an Admin feature to turn these services on and off.  Maybe in Cold Fusion 9.