We're using MySQL at the moment. I would personally prefer using PostgreSQL but the other developers aren't familiar with it and depend too highly on phpMyAdmin.
The new version of the application will run on MySQL 5 so I'll have all of its features at my disposal.
I'm a little hesitant to split into several databases (although you provide good reasons for doing so) but only because I don't know what the ramifications are when it comes to doing a select across multiple databases (something I've very rarely done). We would have to do this because we have to combine customer data quite frequently when presenting it to the end user.
Thanks for your input!