When using the security editor from within the Visual Studio IDE should my database connection point to my projects database or the StrataFrame database?

Your database connection (the one you get to by clicking the StrataFrame menu and Database Connection) should point to the StrataFrame database.  This is where the permissions, users, roles, etc. are kept until you deploy the SFS tables to your database.  So, when you deploy your application, you will need to deploy the data for your project along with the SFS tables.  But, at runtime, the security editor looks at the StrataFrame database, not your application's database.