I'm almost certain it is related to the activation of an account which is rather a pain really because you need to activate and account in order to use it. While I investigate it further, I have managed to find a helpful solution elsewhere courtesy of this KB2855271 Password synchronization troubleshooting guide for Office 365
The fix was to go about and create the registry key and alter the permissions to force a full password synchronisation which I've sumarised below below:
Go to HKLM\Software\Microsoft\MSOLCoExistance and create a new Key called PasswordSync
On the key, set the permissions so that your synchronisation user can:
Query Value
Set Value
Create Subkey
Enumerate Subkeys
Notify
Read Control
(The user is a local account and mine began with AAD_, find it by going to the services and see which user runs the Forefront Identity Management Service)
[*]Create a new DWORD value under the PasswordSync key called FullSyncRequired and set it to 1
[*]Restart the Forefront Identity Management service (which should also automatically restart the Windows Azure Directory Sync Service) and check the event log for any errors.
[*]Enjoy all your newly resynced passwords!
Hope it's useful to someone else!
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