I'm was this issue with one server I use. I fixed this by asking for the supported server options. It then gave me either PASSWORD or GSSAPI. I changed to GSSAPI, then restarted. This failed completely. (I suspect a half-configured setup on the server side - they probably tried to get GSSAPI set up but it never really worked and they left it marked as a supported option.) I then converted back to PASSWORD and restarted. It now seems to have successfully saved my password!
I'm was this issue with one server I use. I fixed this by asking for the supported server options. It then gave me either PASSWORD or GSSAPI. I changed to GSSAPI, then restarted. This failed completely. (I suspect a half-configured setup on the server side - they probably tried to get GSSAPI set up but it never really worked and they left it marked as a supported option.) I then converted back to PASSWORD and restarted. It now seems to have successfully saved my password!
Oh happy day!