NetIQ AppManager 8.x
The windows service will validate the password once the account has been defined within the services applet. This will then retain that password each time the service is started. The logon failure would indicate that the password had changed after it had been defined in the services.
If the 'Logon as a Service' was removed from the user account locally re-entering the password would add the 'Logon as a Service' right back to that account.