What password format are you using?
Is this your dev environment using source code from the repository? The very latest code should be version 188.8.131.52, it doesn't sound like your working copy is updated to the latest code which is needed for the cache dependency files. I would first get your code up to the latest version by right clicking the top level folder and choose TortoiseHG > Update (default branch), then rebuild the solution and visit the setup page, it should have version 184.108.40.206.
Though nothing changed in terms of login since version 220.127.116.11 which is the version where we updated to stronger hashing and encryption with salt.
You can't really manually update your password in the db unless using plain text, since it would be stored as hashed or encrypted otherwise and you have no way of manually doing that.
There is a safety net setting you can put in user.config that will make it try all password formats if login fails:
<add key="CheckAllPasswordFormatsOnAuthFailure" value="true" />
and that would allow you to manually update it in the db to plain text (even when using encrypted or hashed) to get back in but you should not have to do that, so I would save that as a last resort and it won't really be a solution for lots of users if they are all failing.
With hashed or clear text the machine key does not matter but with encrypted it must never change, if the machine key is changed after passwords are encrypted then all users would be locked out and no way to recover the password. machine key on your dev environment needs to be that same as on production if using encrypted.
On your dev machine you could step through the code, setting a breakpoint in Web/Components/mojoMembershipProvider.cs in the ValidateUser method and in PasswordIsValid method and find out what is happening
Hope that helps,