Password field keeps re-encrypting

When using participants login, it is setup to use email as the username and password – a password type field – encrypted.
However when the user logs in to see their profile the password field is shown with may more * characters than their password and if the profile is saved the old password no longer works. Only if the user re-types their password into the field before saving will the login subsequently work.

Seems screwey… but can’t track down the problem. I’ve tried enableing and disableing passwords – but can’t get it to work.