You're not gonna like this answer, but while your correction to the login box is correct the issue is NOT the login box, and it is NOT a Zen Cart issue either..

Part of your issue is your TM template and the way you have integrated FEC and CAPTCHA.. Unfortunately issues in stores with TM template frequently get little to no response from many folks here -- mostly because TM does many things very bass ackwards -- it makes troubleshoot difficult because they DO NOT follow Zen Cart standards which has been part and parcel of the issues you've run into.. particularly the way TM ignores or tries to work around the Zen Cart overrides system..

No simple answers here.. Without looking at your site personally I couldn't begin to say what the issue MIGHT be especially when you factor in a template which does not follow the norm..