It is working now. The issue appears to be in the order in which the steps are taken.
I had created both the connections and the VdBs prior to updating the path information to point to the new MySQL connector implementation. Somehow, it seems like the VdB had cached the old information and it was not being rebuilt?
Anyway, I killed the VdBs and regenerated them (post updating the path info in the connector), and am now able to connect/query from inside TEIID Designer.
The connections designer uses for preview and inside vdb are separate, that is why you have seen that behaviour. We designed them to be separate so that they can point to different design time and runtime environments, if they need to be.