Is the lastest version of SF and DDT able to run on Windows 8?

Yeah, Win8 is far more strict regarding permissions.  There are a few handy things that you may want to consider when dealing with Win8 and Visual Studio.  For starters, as much as I hate it, if you leave UAC on, you will have an easier time with some of the things required by VS2012.  If this annoys you, like it did me, you can also run the "Troubleshoot Compatibility" tool on the devenv.exe in the "...\Microsoft Visual Studio 11.0\Common7\IDE" folder.

If you run VS2012 as an Administrator, it will be more reliable, however, remember that it will be running as a separate session (administrator) so you will have to remap drives, etc.  Like you said, whew... a mouthful.

So, after restarting SQL Server you can now connect with your new password?