May not relate to your problem, just a few random thoughts:
 
@xwiki.sql upload
--The xwiki.sql file should be placed into your MySQL bin directory (usually under C:\Program Files\MySQL\MySQL Server 4.1\bin) before running the command line instruction; and the user "xwiki" with password "xwiki" must be created on MySQL beforehand.
 
@odd characters:
--There should be some odd-looking characters if you use notepad (or another text-based editor) to edit the .sql file, so this is most likely not the problem.  It is worth comparing a second download of the .sql file in case though.
 
@MySQL version 5.0.11
--Should not affect this step at all; *however* note that 5.0.11 is not really supported yet on XWiki (far as I know), so it may be that you experience other problems once installation is complete.
 
@What I do with new installs:
The xwiki.sql file you download can also be 'restored' through the MySQL Administrator tool (downloadable through the MySQL website). 
This is about the same effort as installing through the command line; BUT you can do all database tasks at once (creating user, setting up a backup process, etc).
 

From: Roger Rukundo Nzabandora [mailto:RNRukundo@syscorp.co.ug]
Sent: 03 May 2006 14:10
To: xwiki-dev@objectweb.org; xwiki-users@objectweb.org
Subject: [xwiki-users] xwiki mysql database?

I am trying to install xwiki on my windows XP Pro SP2 computer. I have managed to follow all the instructions successfully up to the point of setting up the xwiki database using the command “mysql -u xwiki -pxwiki xwiki < xwiki.sql”. I get an error message; “The system cannot find specified file”. I am using MySQL version 5.0.11 I don’t know if this could be an issue. Plus I seem to have a problem with the Database I downloaded, when I look through it I find very strange characters which might suggest that the downloadable DB is corrupted. I have attached a copy of the data base as a txt file so you can cross check it and see if there’s anything wrong. I am new to this technology, please help.

Thanks.