I'm a bit concerned about doing this, as I think it introduces an entirely new class of bugs. It also seems like existing signup flows (ie, gaia) are generally pretty aggressive about clearing password.

Highlighted text implies focus. If focus moves, text is no longer highlighted and then user has to hold backspace. This could easily happen due to a regression/bug, which makes the bug much more painful.

Accessibility may not want forced focus on textfield after a bad submit. Also worth considering - do we move focus after hitting enter on the submit button?

Is it common for someone to edit a wrong password given we do not have a password reveal? I never do, simply because I'm not sure what part is wrong.

Puzzled over this for a bit - I think we should follow the patterns that GAIA uses to build consistency throughout our UI. That means the current behavior is WAI so I'm closing this, but feel free to reopen and yell at me if you disagree :)