My XSEDE password does not work for logging into my Atmosphere launched VM

This is not a problem. That is by design.

You use your XSEDE username for Atmosphere-launched VMs but there is NO password set -- you cannot use a password to login initially. You have to deploy using an ssh key to login remotely using a terminal-based SSH client or Putty unless you have explicitly set a password via the web shell or web desktop. We recommend starting with this page:

http://wiki.jetstream-cloud.org/Logging+in+to+your+VM

which specifically says this in the red box in the center:

Please note that your XSEDE Portal password is not used for logging into VMs. If you wish to use password authentication to ssh into a VM (not recommended!) you will need to set up a password (refer to Logging in with SSH for information)

and continuing to

http://wiki.jetstream-cloud.org/Logging+in+with+SSH

which references

http://wiki.jetstream-cloud.org/Adding+SSH+keys+to+the+Jetstream+Atmosphere+environment

in case you need to create and add a key to Atmosphere.

Please note the bit in the red box that says:

You must redeploy or reboot an instance AFTER adding or updating your SSH public-keys in order to have those keys added to the instance.