Works just fine here; I'm not sure what you are seeing. You most definitely have databases available if you aren't seeing the "Not Found" message below.

$ sudo pacman -Sy
:: Synchronizing package databases...
testing is up to date
error: failed retrieving file 'core.db.tar.gz' from localhost : Not Found
core is up to date
error: failed retrieving file 'extra.db.tar.gz' from localhost : Not Found
extra 451.8K 122.5K/s 00:00:04 [############################################################] 100%
error: failed retrieving file 'community-testing.db.tar.gz' from localhost : Not Found
community-testing is up to date
error: failed retrieving file 'community.db.tar.gz' from localhost : Not Found
community is up to date

It looks to me like you've added a server line to localhost where no FTP server is running (ie a Connection Refused error). I have an FTP server running, but the database files are not available there (ie a File Not Found error).

Is there anything else I can provide to give a clue?

Below are actual mirrorlist files and pacman -Sy runs.

Head of /etc/pacman.d/mirrorlist, all remaining mirrors are commented

#
# Arch Linux repository mirrorlist
# Generated on 2009-12-06
#

Server = ftp://mediapc

# Any
#Server = ftp://mirrors.kernel.org/archlinux/$repo/os/i686
#Server = http://mirrors.kernel.org/archlinux/$repo/os/i686

# Australia
#Server = ftp://mirror.aarnet.edu.au/pub/archlinux/$repo/os/i686
#Server = http://mirror.aarnet.edu.au/pub/archlinux/$repo/os/i686
#Server = ftp://ftp.iinet.net.au/pub/archlinux/$repo/os/i686
#Server = http://ftp.iinet.net.au/pub/archlinux/$repo/os/i686
Server = ftp://mirror.internode.on.net/pub/archlinux/$repo/os/i686
#Server = http://mirror.internode.on.net/pub/archlinux/$repo/os/i686
#Server = ftp://ftp.netspace.net.au/pub/archlinux/$repo/os/i686
#Server = http://ftp.netspace.net.au/pub/archlinux/$repo/os/i686
#Server = ftp://mirror.optus.net/archlinux/$repo/os/i686
Server = http://mirror.optus.net/archlinux/$repo/os/i686
#Server = ftp://mirror.pacific.net.au/linux/archlinux/$repo/os/i686
#Server = http://mirror.pacific.net.au/linux/archlinux/$repo/os/i686

# pacman -Sy
:: Synchronizing package databases...
core is up to date
extra is up to date
community is up to date

**** Edit /etc/pacman.d/mirrorlist to the following (commenting out the local server line)

#
# Arch Linux repository mirrorlist
# Generated on 2009-12-06
#

#Server = ftp://mediapc

# Any
#Server = ftp://mirrors.kernel.org/archlinux/$repo/os/i686
#Server = http://mirrors.kernel.org/archlinux/$repo/os/i686

# Australia
#Server = ftp://mirror.aarnet.edu.au/pub/archlinux/$repo/os/i686
#Server = http://mirror.aarnet.edu.au/pub/archlinux/$repo/os/i686
#Server = ftp://ftp.iinet.net.au/pub/archlinux/$repo/os/i686
#Server = http://ftp.iinet.net.au/pub/archlinux/$repo/os/i686
Server = ftp://mirror.internode.on.net/pub/archlinux/$repo/os/i686
#Server = http://mirror.internode.on.net/pub/archlinux/$repo/os/i686
#Server = ftp://ftp.netspace.net.au/pub/archlinux/$repo/os/i686
#Server = http://ftp.netspace.net.au/pub/archlinux/$repo/os/i686
#Server = ftp://mirror.optus.net/archlinux/$repo/os/i686
Server = http://mirror.optus.net/archlinux/$repo/os/i686
#Server = ftp://mirror.pacific.net.au/linux/archlinux/$repo/os/i686
#Server = http://mirror.pacific.net.au/linux/archlinux/$repo/os/i686

# pacman -Sy
:: Synchronizing package databases...
core 36.1K 5.7K/s 00:00:06 [#####################] 100%
extra 454.6K 29.5K/s 00:00:15 [#####################] 100%
community 364.3K 20.6K/s 00:00:18 [#####################] 100%

No, I stated *exactly* what I had running- my local proxy script where the file was not available. This is what it looks like if nothing is running:

$ pacSy
:: Synchronizing package databases...
testing is up to date
error: failed retrieving file 'core.db.tar.gz' from localhost : Connection refused
core is up to date

I am using HTTP, and I do have a path rather than just a hostname. I wonder if something with FTP is weird here.
Two things that might be helpful:
1. wget ftp://mediapc/core.db.tar.gz
2. Comment out all repos besides [core], enable your local server and just one other mirror, and then save the output of pacman -Sy --debug. Please attach it so the output doesn't make this bug report unreadable.

Output of the tests attached. Sorrry for the mess previously.

I just cannot reproduce this error. I'm not sure where to go from here, other than maybe some logs on your FTP server side when doing this -Sy operation? It falls back every time for me, and this is with a ftp server running now.

$ sudo ./src/pacman/pacman -Sy
:: Synchronizing package databases...
testing 16.7K 80.7K/s 00:00:00 [############################################################] 100%
error: failed retrieving file 'core.db.tar.gz' from dublin : File unavailable (e.g., file not found, no access)
core 36.2K 88.8K/s 00:00:00 [############################################################] 100%
error: failed retrieving file 'extra.db.tar.gz' from dublin : File unavailable (e.g., file not found, no access)
extra 451.9K 127.2K/s 00:00:04 [############################################################] 100%
error: failed retrieving file 'community-testing.db.tar.gz' from dublin : File unavailable (e.g., file not found, no access)
community-testing is up to date
error: failed retrieving file 'community.db.tar.gz' from dublin : File unavailable (e.g., file not found, no access)
community 372.8K 111.4K/s 00:00:03 [############################################################] 100%

Weird. FTP log doesn't show anything interesting. It's probably not worth spending any more time on this one, as it's not a big deal. I had strange behaviour from mc at one time (nothing about it on the internet) that resolved itself after enough upgrades, maybe this will do the same.

This problem has resolved itself as of pacman-3.4.0-2.