How to escalate database user permissions to create new databases?

You sould read the online manual that contains all the proper procedures, but where's how you can do it:

<?php

include("xmlapi.php");  
$db_host = "localhost";  
$cpuser = "myuser";  
$databasename = 'mydatabasename';//do not prepend with username
$databaseuser = 'mydatabaseuser';//api will do that for you
$databasepass = '123456';

$xmlapi = new xmlapi($db_host);  
$xmlapi->password_auth("root","root_pass");  
$xmlapi->set_debug(1);//this setting will put output into the error log in the directory that you are calling script from 
$xmlapi->set_output('array');//set this for browser output

//create database  
$createdb = $xmlapi->api1_query($cpuser, "Mysql", "adddb", array($databasename)); 
foreach($createdb as $v)
{
    $result = $v['result'];
}
if ($result == 1)
{
    //create user  
    $usr = $xmlapi->api1_query($cpuser, "Mysql", "adduser", array($databaseuser, $databasepass));  
}
foreach($usr as $v)
{
    $result2 = $v['result'];
}
if ($result2 == 1)
{
    //add user to database  
    $addusr = $xmlapi->api1_query($cpuser, "Mysql", "adduserdb", array($databasename, $databaseuser, 'all'));  

}
print_r($addusr);


?>

This should be adapted to your API, but what it does is allow the DB creation, with a user creation, and finally, associate then!

Ps: see xmlapi-php-class

Hope it helps you...