readme_embedded.txt says:

Client access can be only via the TCP/IP local loopback
protocol, i.e. a TCP/IP connection string that includes
the server name "localhost" or IP address 127.0.0.1; or
by using the Named Pipes protocol incorporating the
Windows server name.

The embedded server does not support the IPServer "local
connect" to a database file path without a server name.
The client must have exclusive access to the database file.

It seems that it is completely wrong. The dsn has
to be a plain directory path for it to work and
it seems that it has indeed to be the local connect
which is what worked for me for FeniSQL.

Still fails to connect with IBOConsole though... any
suggestions?

Anyway, I think the readme had better be fixed as it
will end up wasting a lot of people's time.