Trouble with initial mysql configuration

[H.I. McDunnough]

I am using FC4 fully updated with yum. The first time I start mysqld, it runs mysql_install_db (I think) and displays:

...
PLEASE REMEMBER TO SET A PASSWORD FOR THE MySQL root USER !
To do so, start the server, then issue the following commands:
/usr/bin/mysqladmin -u root password 'new-password'
/usr/bin/mysqladmin -u root -h linux password 'new-password'
See the manual for more instructions.
...

/usr/bin/mysqladmin -u root password 'new-password' => works fine

When I run "/usr/bin/mysqladmin -u root -h linux password 'new-password'", I receive:
/usr/bin/mysqladmin: connect to server at 'linux' failed
error: '#HY000Host 'localhost.localdomain' is not allowed to connect to this MySQL server'

When I login using "mysql -p" or "mysql -p -h localhost", I am able to login.

When I login using any of the following, I receive "ERROR 1130 (00000): #HY000Host 'localhost.localdomain' is not allowed to connect to this MySQL server":

mysql -p -h 127.0.0.1
mysql -p -h linux
mysql -p -h 192.168.1.3

[root@linux mysql]# netstat -anp |grep mysql
tcp 0 0 0.0.0.0:3306 0.0.0.0:* LISTEN 2865/mysqld
unix 2 [ ACC ] STREAM LISTENING 24719 2865/mysqld /var/lib/mysql/mysql.sock

Why am I not able to use anything but localhost to login? The only reason I care about this is that I am having some trouble setting up Ruby on Rails. I had no trouble setting any of this up on FC3, but now Ruby on Rails cannot connect to my database no matter what host I enter. I am thinking this may be related. Even if it's not, I'd like to know why I can't connect to anything other than localhost. Thanks.