Managed to re-create the problem with one of my testing wallets.
Something is very wrong with the wallet encryption/password as you can change the password even without filling the current password. If you changed your password this way it'll look like you're successful, but you'll get that error message every time you try to do anything that requires the password.
Also removing the password this way (without filling the current password) will remove the password without actually removing the encryption, and when you view the seed you'll see the encrypted seed instead of the normal multiple words.
Not sure how to fix it other than restoring from the original seed.
thanks a lot for that information. I received various reports but until now I was not able to reproduce the issue.