Minecraft Server connection refused (process running on 25565 being detected)
There are two possible reasons why you are getting the protocol error disconnects that I can think of.
Your Minecraft Client and Minecraft Server are running different versions of the game. Check that those match, that you are not using a server.jar from 1.6 and a minecraft client of 1.7.4.
You have a local firewall rule enabled that is not allowing you to connect properly.
Here are a few things to try:
If you are running both the client and server on the same computer, connect using 127.0.0.1 as the IP address (localhost), if you are running the server and client on your local home network, but on different machines, try connecting using the local IP address. If you do not get the connection refused error, you could have a problem with port forwarding. If you do get the error try the following.
In your configuration you have the setting "online-mode=true", try setting this to false and connecting using the above methods. Normally this setting only causes problems for users who have not paid for the full version of the game and/or are not using the official launcher. If you are able to connect using this please clarify whether or not you have paid for the game and if you are using the official launcher or not (the launcher you get from minecraft.net)
As mentioned above, check your firewall rules and maybe try connecting with your security program disabled (re enable it after this). If you are able to connect you will need to find out how to change your firewall/security program settings to allow java to recieve global traffic.
Kick your computer, it won't help but people seem to do it anyways ;D
You may be running multiple instances of the server. If so, you may want to kill (terminate) the java processes that are running them. If you're running the server and game on your computer, be sure not to kill your game's process.