Hi Craig!
Yup, that looks OK (localhost should be fine — providing that you're running on the same machine, obviously).

Well, that only leaves two possibilities that I can think of:
1. On your PSX Preferences | Basics page, under "Main network" have you got the right IP address, and is the radio button for port 10747 selected?
2. The PSXonMCP2 documentation mentions (but doesn't go into any detail about) the fact that you need "USB-to-Serial Drivers provided by VRinsight". Have you visited the VRinsight download page
http://www.vrinsight.com/devel_shot/index.html and downloaded and installed the "USB-to-Serial Driver Software" (near the bottom of the page)?
If you haven't installed the driver, then that might be why you can't see a COM3...? ¯\_(ツ)_/¯
But if you've covered both of those bases, then I'm out of ideas, I'm afraid....

Cheers,
Brian