I also had this trouble, after updating my cellphone to the latest firmware. However, I managed to fix it by doing the following:
1) Ignore the "Incorrect user / Password" error message
2) Go to Configuration / Sony Ericsson / Timescape / Twitter
3) Type the e-mail address you used to register to twitter instead of your username.
4) After this, it should connect with your account properly. However, if you go back to Timescape, it'll tell you again that something is wrong with your username and password.
5) This time, touch the message and another screen will appear, asking you to log in. Type your username and password and it should work.
Yeah... I know that it's very strange, but it worked for me. Hope it can be of help to you, too.