I made my first commit to fossil in a long time, and started from a fresh clone.
1. So, to be able to push I did:
     fossil push
     typed the password, and of I went.
   OK

2. Later I ran
     fossil update
   and got back:
    Autosync:
                    Bytes      Cards  Artifacts     Deltas
    Sent:             193          3          0          0
    Error: login failed    fossil:
   BAD

3. I should note, when I do a
     fossil pull
   I get asked for the password again, and then the pull works.

I suspect that something is wrong with the local password storage, or how it is used by the transfer code. ... Looking into the user table fossil has stored a HASH of my password ... The last-sync-url contains my user name ... Oh, it is some mismatch between client and server about password vs hash usage.

While this can have a severe impact on usability I decided to set the priority of this ticket only to important because of 3.

Last note: I ran a 'fossil rebuild' and then the above again, this had no effect on the problem.

Thanks Richard. Tried this using the binary built from [328fc92ceb318278b] and the problem with update is gone.

I came to wonder why pull and sync (maybe push) ask for the password tough, given that it is known. The modified 'update' shows that fossil can find the information somewhere for an automatic pull/push cycle.