2014-12-08 12:11:39,752 - WARNING - Could not set password mode: "Authentication is required"
Which means that AS and system-settings couldn't agree on authenticating the user enough to let the user change their password mode under the covers. We'd need to add some debug prints for both of those and investigate what's going on in more depth I think, to nail this down further.
Based off of Ken's system-settings log, we see:
2014-12-08 12:11:39,752 - WARNING - Could not set password mode: "Authentication is required"
Which means that AS and system-settings couldn't agree on authenticating the user enough to let the user change their password mode under the covers. We'd need to add some debug prints for both of those and investigate what's going on in more depth I think, to nail this down further.