This needs to be fixed ASAP. See post here: on-prem data gateway (personal mode) SQL server login not working
I cannot repro the same issue on my side. Please refer to my screenshot below. I can use basic login with the latest on-premises data gateway (personal mode) and refresh SQL dataset successfully.
I suggest you to create a support ticket at http://support.powerbi.com (see bottom of page).If issue is resolved, you can share the solution here later to help others who have the same problem.