Users need to reset pwd after registration

We are facing a very strange problem at our wordpress+buddypress website hpathy.com

When a user registers (http://hpathy.com/register) everything goes fine. The user is sent an activation email and clicking on the activation link says that your a/c has been activated and now you may login with your username and pwd.

BUT now when the user tries to login ..the password entered in the registration form doesn’t work!!!!

Every user has to reset his pwd using the ‘Lost Yours Password’ link and they can login once they reset their pwd.

Can anyone help me with this? I would appreciate any insights.