I know that this is an oldish thread, but I've just spent a few hours trying to get this to work and my solution was different (and easy) to any I've read so I thought that I'd share it in case it helps anyone else.
I was getting exactly the same wrong password error, after confirming that I was using the older extreme (the rectangular one), so this should have worked. But no matter what password I tried it would not change. So then I managed to get an old version of Airport Utility running on my Mavericks mini and a bit of delving showed an SMTP menu I'd never seen before and it said that the SMTP password was public (must be a default)
So I changed the password in the SR setup to public and instantly it all worked beautifully.