Well I don't know exactly what happened but it appears that on original configuration, I used default. This failed and so I just did the custom configuration since I've had all the users and user groups set up from the Biztalk 2004 days (yesterday). After I deleted all the databases and redid the configuration then it worked.
So for others who may get the same problem:
1.Undo all configurations
2. Delete all the Biztalk dbs
3. Do configuration (custom worked for me).
There were a few tweaks that I had to do to the sql db but it was more of the making sure that certain users can create dbs.