Try using the \xampp\xampp-control-3-beta.exe control panel as it has a better reporting window and for the latest version of this control panel click on the link in my signature.
Download and extract all files into the xampp installation folder and overwrite when asked then use this newer version instead.
Also open the \xampp\mysql\bin\my.ini file in your text editor and remove the # from this line so it looks like this
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bind-address="127.0.0.1"
Save the file and restart MySQL so it reads the edit in the my.ini file.
Open C:\Windows\system32\drivers\etc\HOSTS file by dragging it into an open text editor and make sure the first line after the beginning comments looks like this
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127.0.0.1 localhost
If not then add it then save the file and try again.
Also a reboot won't hurt to clean things up.