That is an interesting possibility. I did reformat the drive when I installed Lion. At this point, it would be a huge task to do it again. I am trying to remember how I reformatted it, I think I formatted it in case insensitive mode but can't be sure. I just tried saving a file into a directory with the name "Test.rtf". When I then tried to save a file in the same directory with the name "test.rtf" the system told me there was already a file with that name in the directory. This would lead me to believe that I formatted it with case insensitivity. If I understand things correctly, a case sensitive format would allow both to be saved.
I did try a few things. I changed the permissions per one of your posts. I also tried changing the case of the xampp directory and the paths in the mysql.server file so they were all lowercase to see what would happen.
No change with either of these. mysql fails to start.
Another interesting fact. I decided to install MAMP and got the same result I did with XAMPP. Apache and php will start up but mysql will not.
It would be a big trick if something different was causing this from what is causing mysql to fail to start in XAMPP.
This is discouraging. As did many, I went through hell trying to install mysql myself and rejoiced when I found XAMPP. If it doesn't work now . . . arghhhh!