[charrua]

I have not noticed the fallback. In fact i have seen a complete opposite where it will lock up the atv if it can not find the mysql db. What i was thinking was that disabling sql lite entirely may freeup resources and thereby speed up the gui. Your thoughts ?

Actually even when XBMC is not accesing SQLite video and music databases it will still use other SQLite dbs for storing folder view modes (stored in ViewModes.db) and also dbs for programs and scripts libraries (which are not ported to MySQL yet). Anyway not using SQLite at all will not freeup resources, because SQLite is practically not using resources in the first place: SQLite is not server based, that means that unlike MySQL it doesn't need any additional program running in order to access the databases, it's file based (XBMC accesses the SQLite db files directly). That's also why you can't "disable" SQLite, because there is nothing to disable.
Regarding XBMC GUI, you'll probably see slower speeds while using MySQL database because it's located in a remote server (and also because SQLite is natively faster than MySQL), the big advantages that you have with MySQL against SQLite are: native networking capability (which SQLite lacks) and concurrency (that means simultaneous connections) and that's why it's a good alternative to SQLite when you need several XBMC instances to access(sometimes simultaneously) a central (and remote) db.
If you have a particular problem while using the MySQL connection (like the lockup you describe), you should enable the debug log in XBMC and ask for troubleshooting help in the specific thread of the feature.