I'm assuming you both tried the solution:
Back up your registry and remove the user account information from the "Protected Storage System Provider" subkey. Then, reenter your password options. From Save password setting not retained in Outlook or Outlook Express - this seems to work for some.

Another trick that seems to work is going to "control panel" -> "user accounts" and then click on "manage your network passwords" on the left pane. enter your mail server's name, username and password.

The other thing that could be causing the problem is your Antiviral software scanning email. You can test this by either disabling your AVS or changing the settings so that it does not scan email, then restart.

Unfortunately this seems to be a huge issue with Outlook POP configurations.

Hope this helps point you in a direction that can be helpful.