Misleading error message adding a user on Windows 2008

Today I was setting up a new development VPC for SharePoint. When I tried to add a new user via the AD tools wizard I got the error

"Windows cannot set the password for [new user], network path was not found"

Forums suggest the issue is DNS resolution related, but for me it turned out to be the simple fact the password I was using did not meet the domains minimum requirements.

Not the most helpful message in the world.