Hopefully my problem is the same, thus my experience may be additive to this. Mac mini 2018 fell over, reformated, reinstalled, couldn't get timemachine to connect to the time capsule. Manually went through the set up process of macos, creating my account and such. Opened finder, opened network, opened the time capsule, password ok, opened backup folder, opened the relevent sparse bundle.. again password ok...

please note: I am cutting and pasting the same password. no fat fingers here..

It mounts, I can happily copy files, user folders, from the encrypted time machine backup back to my system manually.

So good news.. I restored! manaully.

Now I go to set up time machine again.. preferences> timemachine> back up automatically> select timecapsule> paste password > asks me if I want to use the existing encrypted> say yes > asks for password > paste again > incorrect passsword!

I tried truncating the password to 12 characters.. no dice.. I checked the airport utility... the back up folder says it is protected with the device password. which is consistant with my experience of manually mounting the sparse image with the same password. It is most definitely the password, I have 2TB worth of rescued files to prove it.. What was weird is that through this process, I openned the sparse bundle many times in trying to isolate the problem... and well, sometimes the cut and pasted password would not work and I would have to force disconnect from the time capsule and start all over again...

Perhaps future generations will figure this out..

Hopefully, my problem is the same, thus my experience may be additive to this.

Mac Mini 2018 fell over, reformated, reinstalled, couldn't get Time Machine to connect to the time capsule. Manually went through the setup process of macOS, creating my account, and such.

Opened Finder, opened Network, opened the Time Capsule, password OK, opened Backup folder, opened the relevant sparse bundle, again password OK.

Please note: I am cutting and pasting the same password. No fat fingers here.

It mounts, I can happily copy files, user folders, from the encrypted time machine backup back to my system manually.

So good news. I restored it manually.

Now I go to set up Time Machine again: System Preferences > Time Machine > select Back Up automatically > select Time Capsule > paste password > asks me if I want to use the existing encrypted > say Yes > asks for password > paste again > incorrect password!

I tried truncating the password to 12 characters, no dice. I checked the Airport Utility: the backup folder says it is protected with the device password. This is consistent with my experience of manually mounting the sparse image with the same password. It is most definitely the password, I have 2TB worth of rescued files to prove it.

What was weird is that through this process, I opened the sparse bundle many times in trying to isolate the problem, and well, sometimes the cut and pasted password would not work and I would have to force disconnect from the time capsule and start all over again.

Perhaps future generations will figure this out.