To provide a bit more detail for possibly puzzled FT readers, as well as more free IT consulting for SWA: a simple explanation is that the website now has a password complexity rule that did not exist in the past. The modal dialog applies the new-ish password complexity rule to the supplied password and rejects older non-compliant passwords without submitting them to the server. The non-modal overlay form doesn't run the new password complexity script, it just submits it to the server, which recognizes the old (no longer compliant) password as valid.

Of course my surmising could be mistaken...