Glad it worked for you, oriecat. Adding a new user works here, too. I am just trying to experience a successful password retrieval - doesn't seem to0 intuitive due to a link to login before the password is actually activated from the first email and then ultimately fails for me anyway.
1. I click "lost your password?", enter the user's name and email address and hit "Retrieve Password"
2. I get a screen that says "The e-mail was sent successfully to guest's e-mail address. Click here to login!"
3. The email arrives with a link to click (making the link in #2 moot)
4. I click the link in the email and get a popup screen that says, "Your new password is in the mail. Click here to login!"
5. I click the link from #4 and wait for the second email that never comes. Additionally, an email arrives at my admin account that says, "Password Lost and Changed for user: " with no user name.
Is your experience different?