It looks like this was fixed some time ago. The ui now says "passwords
do not match".
** Changed in: ubiquity (Ubuntu)
Status: New => Fix Released
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https://bugs.launchpad.net/bug
Noticed this when installing 10.04 UNE.
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No feedback when wrong password is entered in account setup stage
https://bugs.launchpad.net/bugs/549342
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A screenshot demonstrating the problem is at
http://people.ubuntu.com/~dylanmccall/screenshots/ubiquity/user-account-
setup-bug549342.png
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No feedback when wrong password is entered in account setup stage
https://bugs.launchpad.net/bugs/549342
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