In my situation I would like to develop locally and then push to live server after testing. Right now there is no way that I can connect to my local test database while leaving the remote connection alone.

If I change my connection to pull from my local database it automatically updates the live server connection leaving the live server dead without connection to a database. I then have to set the connection to my live database to keep it functioning but then I can't further develop on my local machine without being connected to live data.

Is there a workaround for this or some way to stop the extension from automatically uploading the connection file to the live server?

Yes! I'm very much in favor for this option! It is very frustrating!

The only workaround to this annoying fact I found so far, was to name the database on my local server exactly as the remote one AND use the same username / password credentials from the remote server.

It is frustrating because I used to name my local databases with comprehensive names, which is usually not always possible on remote servers.

That doesn't work for me Greta.

My Testing server uses 'localhost' amor the connection and the live server uses an IP address. Other than that my local testing server and the remote live server are identical.

Sorry, this is no solution, then. I once fiddled with the two connection files (in DMXConnect/modules/Connections/ and DMXConnections), named those for the remote server "yourconnect_remote" and uploaded it via ftp. Up there I renamed them back. But whenever these files get updated, the remote ones are brutally overwritten again. I have not found a reasonabel way to prevent this.
If DMX would separate the connection string from the database structure, the propblem could be solved easily.

Yeah, I used to upload the connection file then on my local one just edit the connection and save that way I could work on a local database and then when the files are uploaded they will be using the remote database. But now the connection file gets overwritten and uploaded overtime so this can no longer be done.

Kinda defeats the purpose of having a testing server.