Earlier this week I stumbled across the solution to why my WLM refused to remember the correct password. So I thought I'd share what worked for me in case anyone else is still suffering.

For me it was Games for Windows Live that was causing the problem - ages ago I had entered and saved my password in-game and WLM was using that as the default instead of the one I entered and saved each time I logged into WLM. Updating the password for Games for Windows Live fixed the problem for me