Ok, I think I figured it out. There was an existing my.cnf file in /etc/mysql before I installed mysql via emerge - I found this by using emerge's suggestion to run
find /etc -iname '._cfg????_*'
After I renamed the cfg version to my.cnf, the command worked:
cd /etc/mysql
mv my.cnf my.cnf.backup
mv ._cfg0000_my.cnf my.cnf
I'm wondering if this would work with the newest home edition? I don't have a native install. I have it so that I can play games and use Linux at the same time.
I checked within this article and it says that it was last updated Jan 24th 2005... that's basically 2 full years ago.