Couple of things. This line:

output database: log, mysql, dbname=snort user=sensor1 host=192.168.0.69 port=3306 sensor_name=Sensor1 detail=full
Should have password=yoursnortpassword

That's probably the error your getting.

Second, the lines that say INCLUDE $RULE_PATH should be changed to the relative or absolute path of your rules. The variable doesn't seem to work that well I've found. So if your rules are in a seperate directory in etc it should be changed to INCLUDE rules/rulename.rules