I'm getting as far as server select, but the only thing I see is 127.0.0.2, which looks suspiciously like the client is talking to my own computer instead of an external server. Clicking on the server freezes the client for a couple of minutes and then turns up the "Can't connect to DBserver" message. What gives?
Are you running a personal firewall of some kind? From what I recall of the discussion of technicals, Paragon Chat pretends to be a City of Heroes server, and launches the client and asks it to connect to 127.0.0.2 which PC is supposed to bind to. The client connects to PC, PC connects to the Titan XMPP server, and that's how that works. If the game client cannot connect to PC, that suggests either that PC could not bind to 127.0.0.2, or that something is blocking the game client from connecting to that address.
By any chance are you on a Mac? If so, you might need an actual Mac person to help further, as I am not running Paragon Chat on that platform. I know Leandro mentioned some funky problems they were trying to work around involving local loopback addresses, specifically an issue that was different on Windows and the Mac due to Windows firewall blocks on 127.0.0.1 and the lack of binding of 127.0.0.2 on Mac platforms.
Edit: Ninja-ed.