For the second time in little over a week I ran into the same situation where, after updating the CustomSettings.config file and restarting the NAV Server, RTC was still connected to the previous database. The first time this happened I eventually got RTC connected to the right database by restarting my computer.
As I didn't want to restart everything again today I decided to pick this up a bit more intelligently. So I searched the forums but, although I came across various worthwhile info, it did not provide me the right hint. So I wondered how I had done this before. I could clearly recall that I had been changing reference to databases like this before and I was quite sure that simply restarting the NAV Server was enough. And then I realized that only recently I had configured my default NAV Business Web Services to automatically start up.
"Might it be," I asked myself: "that both servers should be stopped before the updated CustomSettings.config file could take effect?"
A simple trial of this thought proved me wrong, oops, sorry: right! I stopped both services and after that restarted them again. Aha.
To better understand this all I had a look in the Microsoft Dynamics NAV 2009 Developer and IT Pro Documentation. Specifically these sections gave me some better understanding:
Apparently both NAV Server and NAV Business Web Services are linked to each other and if either one of them is still running the original config file is still 'active'.