User passwords set under Active Directory are not syncing with Office 365. i.e. users cannot login to the Office 365 portal with their domain passwords.
The Directory Sync tool is installed on a Server 2008 SP2 domain controller.
All other user attributes appear to be syncing correctly.
You can try forcing a full password sync using powershell.. Open the DirSync PS console (C:\Program Files\Windows Azure Active Directory Sync\DirSyncConfigShell.psc1) and run:
Set-FullPasswordSync
thenStart-OnlineCoexistenceSync
Issue is due to the server running SBS Server 2008. I believe that DirSync is not officially supported on SBS 2008 or 2011.
Resolved issue by installing Azure Active Directory Connect on a Server 2012 host that is connected to the same domain. A much better tool to configure that DirSync.
Azure Active Directory Connect is also not supported on SBS 2008 or 2011 either, I think, due to its reliance on PowerShell 3.0 (Windows Management Framework 3.0).