There is a solution for this in SSMS 2012 that worked for me. Microsoft now provides a mechanism for removing a server from the list of remembered servers, and removing the offending server from the list will allow you to save the password the next time you connect to it:
- In the Connect to Database Engine dialog, drop down the server name list
- Use the arrow keys to select the server for which passwords aren’t remembered
- Press the delete key on the keyboard.
https://web.archive.org/web/20160216044501/http://blogs.msdn.com/b/managingsql/archive/2011/07/13/deleting-old-server-names-from-quot-connect-to-server-quot-dialog-in-ssms.aspx