I just read my assignment again and I stumbled about one sentence:
Your choice of RMI or serialized objects will not affect your grade, but no other approach is acceptable. In either case, the program must allow the user to specify the location of the database, and it must also accept an indication that a local database is to be used, in which case, the networking must be bypassed entirely. No authentication is required for database access.
I am a little confused about this "specify the location" and "accept an indication that a local database is to be used" thing.
The User that started the Server, the Client or the combined version already knows, what he is starting, right ? There is no way, a user could start a Client to connect to a server and then connect to a local database.