Try hitting Ctrl-Alt-F1 and use the same login info. My guess is that it will work. Does it?
That is what I'm experiencing. I set a password for the root user and am able to login using those credentials but can't get through using the pi user, even though I'm sure the credentials are correct. Something is amiss.
Much like this user with a similar problem, I installed tightvncserver just before I started seeing this problem:
http://www.raspberrypi.org/phpBB3/viewt ... 28&t=27905
For me also, it seems to have to do with that install, but I can't figure out why and how to reverse the problem.
Anyway, hope this helps.