And: make sure you are logged in (or did an su) to an admin account.
And: make sure your cap locks are off (though you did get the sudo command to execute, so, 99.999% sure the cap locks are off).
One other thing to be possibly aware of: some Unix environments are picky about which special characters can be used for passwords. Not sure about the flavor of BSD OS X uses, but I have seen the issue when using the same password between HP-UX and Solaris (Solaris was a little more accommodating). So, if you have a special character in the password, MAYBE it could be causing some grief.
Mini 9 | OS X 10.6.7 | 2GB | 16GB STEC | .3Mp | No BT |
BIOS A05 | USB Legacy: ON | USB Wake: OFF | Bluetooth: OFF | NBI .8.4 RC1.1 (20100616212351)
Sleep: Working | Speakers: Working | Headphone Jack: Working