Bumping up this thread because I have a problem with this error as well. However, something interesting and different is happening on my end that I feel is enough cause for this bump.
I have a patched (or should be patched, but I’ll get to that in a moment) WLM 8.5 on Vista Home Basic SP2 installed, and I get this exact same error (same with WLM 8.1). Two things that might be of interest here are 1) that I can still use 7.5 on Windows 10 and XP with no problem (I’ve actually got it running right now on Win10), 2) I know my password is correct, and 3) this screenshot that concerns me:
That display picture is the one I have for my Microsoft account, not my Escargot account (which, yes, is the same email but with a different password; and no, I have not tried to log in with my Microsoft credentials just in case). I have installed a “patched” version (hex editor data for msnmsgr.exe can prove that), and I am online (I’m actually typing this on Vista via SeaMonkey), so all I can say at this point is WTF is going on here?