mine worked fine, but you may want to just try retyping it all. took me a couple times to get my password right (which kicked up that error you got).
i hate how gmail lumps sent/inbox all together. so when you download your mail, most of your mail is stuff you've sent yourself.
its part of gmails 'no folders' thing. i think they need to do something to fix it though, b/c its incredibly annoying if you use gmail via pop3
i have rules setup on my macbook to autosort email into the sent box, but the iphone mail client doesn't have any real support for that.
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