Would it be possible to do the following: Go to App_Data/Sitefinity/Logs, delete the files, reproduce the error and attach the generate file. If there is some underlying problem, it will be noted there.
Thank you in advance.
The recoveryMailAddress should be configured, even if you do not send an email:http://screencast.com/t/FdTfcRN0OMd. If it is left empty, the password reset will fail. After you enter an email and restart, the new password will be generated and shown.