BUG #1779: psql.exe doesn't promt for password yet password authentication fails

The following bug has been logged online:

Bug reference: 1779
Logged by: Jon Rylands
Email address: jonny(at)rylands(dot)biz
PostgreSQL version: 8.0.3
Operating system: Windows XP SP2
Description: psql.exe doesn't promt for password yet password
authentication fails
Details:

Outline
-------

psql.exe doesn't prompt for a password, have tried the all combinations of
the following switches:

-U username
-W
-d dbname
-h 127.0.0.1
-h localhost

The username is definitely valid (am using postgres username) as can log in
normally using the pgAdmin III graphical utility.

Events
------
1. Installed PostgreSQL for first time yesterday. System has previously had
PostgreSQL installed by Cygwin by default though I believe this was not
installed as a service and has certainly never been used.
2. Yesterday used fine, ran some scripts via psql.exe to create tables, data
etc.
3. Today, dropped the database I had created and recreated a blank
database.
4. Ran psql.exe but could not log in as it did not prompt for a password.

Config files
------------

My pg_hba.conf contains only:

host all all 127.0.0.1/32 md5

I haven't made any changes to the other pg_ident.conf and postgresql.conf.

Further comments
----------------

I spent approx 3 hours trying different things- reinstalling PostgreSQL,
creating different users and trying them, changing the password but with no
luck. Spoke to several people in the Postgres IRC channel but all their
suggestions didn't help things.

I understand it my be difficult or impossible to recreate this bug and as a
software developer I know its infuriating to receive bug reports which you
cannot re-create but I believe it should be logged as I really feel I've
looked in many locations for the the solution (and to see if I was being
stupid), also have checked Google and I see other people with the same
problem on Windows with no solution either.

If you require any additional information, drop me an email.

Thanks,
Jon Rylands.