Ssh – Putty: Incoming Packet was garbled on decryption

It sounds like you've got it "backwards". The destination is not your loopback, it's the remote machine on the other network. That, or you're using Remote instead of Local for the tunnel.

Try flipping the IP addresses around, example:

putty.exe -L 3307:mysql.yourdomain.com:3306 

Where mysql.yourdomain.com is the name of the host that has the MySQL service you're trying to contact. When putty pops up the connection dialog, put in the address, connect, and log in. Then connect to localhost:3307 using the Administrator tool.

Can you try running plink -v and post that output?. Below I've changed the command to echo $PATH:

C:\Documents and Settings\dave>plink 10.0.1.1 -v /bin/echo $PATH
Looking up host "10.0.1.1"
Connecting to 10.0.1.1 port 22
Server version: SSH-2.0-OpenSSH_5.1p1 Debian-6ubuntu2
We claim version: SSH-2.0-PuTTY_Release_0.60
Using SSH protocol version 2
Doing Diffie-Hellman group exchange
Doing Diffie-Hellman key exchange with hash SHA-256
Host key fingerprint is:
ssh-rsa 2048 4a:84:5d:a8:a2:29:95:c0:4e:92:d1:38:68:e6:2b:5f
Initialised AES-256 SDCTR client->server encryption
Initialised HMAC-SHA1 client->server MAC algorithm
Initialised AES-256 SDCTR server->client encryption
Initialised HMAC-SHA1 server->client MAC algorithm
login as: dmo
dmo@10.0.1.1's password:
Sent password
Access granted
Opened channel for session
Started a shell/command
Server sent command exit status 0
/usr/local/sbin:/usr/local/bin:/usr/sbin:/usr/bin:/sbin:/bin:/usr/games
Disconnected: All channels closed