Windows will automatically change the number of astericks that are displayed in a password dialog box as a precaution to having someone see the number of characters in your password.
As far as the password being the trouble, you should check with your ISP to see what type of authentication method they are using. There are several including: Clear Text, CHAP, and MS-CHAP. If the auth. methods do not match you will not be able to log on. Check for the settings in the properties of the dial up connection.