Same thing with SFTP in SecureFX… It turns out to be easily fixable, though (tip: Google for the error message you get!).
The deal is that they just upgraded the servers to Debian Sarge, and now “Password”-style authentication is disabled. You just have to update your connection settings to use “Keyboard-Interactive” authentication. See details here:
Once that change is made everything works fine; SecureCRT can still save your password for the next login, etc…