Steve Langasek told me in person that this is due to PAM's return value
calculation, and the lack of a third pass through the stack to cope with
the situation where the second pass (in this case, checking that
passwords match) fails when the first pass succeeds. Apparently there's
been some recent work on this upstream.

-- 
passwd indicates password updated although it wasn't
https://bugs.launchpad.net/bugs/303515
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