I'm glad you posted the solution, because i'm having likewise problems and a am too using a password containing the number sign #
My mail.log and auth.log entries have the same errors as yours, and am about to fix it by changing the password in all the files and database.
I'm wondering though, would having the password wrapped in single quotes negate the special characters like in most programming language's?
p.s. Sorry to bring up an old thread, but it is relevant to my problem.
My install of the mail server with postfix
dates from half a year back, and WAS running perfect, but i lately changed the password and then the problems started.