Membership Plug and Registration Page

I am having an issue with the membership plug in and just normal registration.
If you aren't a member or registered you will see a registration form before the membership options show.
That form seems to be working, but it's really not. After users fill out the information, and follow the activation email link, they can't log in AT ALL. And it never lets log in.
The accounts are being created on the back in, but the username and password never work so that the user can log in.

We have tested it many many times.
Should that registration form on the membership page even be there?
Is it supposed to work for registration?

Are membership and registration supposed to work together?

Any help is appreciated.