IPad2 iOS 6.1 cannot send email - password not saved

I recently upgraded to IOS 6.1 and it must have been around that time that I started receiving errors when trying to send emails. I can recieve fine, but cannot send. The error I get is "A copy has been placed in your Outbox. No password provided. Please go to Mail Account Settings and enter a password."
When I add the password to the outgoing server it verifies. I try to send and get the same message. When I go back to the server settings the password is no longer there. Why won't my password save and how can I fix this? I never used to need a password but for some reason it won't work now without it.
I was able to get it to work once from home with the password but now it won't work anywhere. If i try adding a username as well as the password it just gives me an error that the user name is invalid.
I have checked all my smtp and outgoing server settings, added multiple servers (primary, remote, etc....) and validated ports, changed my webmail password with shaw (to ensure req's for mobile access were met), tried deleting the account and setting it up again, etc... Everything short of actually restoring my ipad, which I don't want to do unless there is no other way.
Also as an FYI - I have 2 mail accounts with Shaw but use one only to send mail (in the process of removing the older one). We also just moved and cannot Shaw service at home so are with Eastlink. The Shaw account is still active and will stay active and I have added both Shaw and Eastlink Server details for outgoing mail. When I'm not home, I rely on my Bell 3G connection for data.
Its very frustrating since I no longer have any other way to email and don't have a cell phone so my main way to contact atm was via email. I am fairly certain that the issue is related to apple software and not my servers, but I'm no expert. I have read that I cannot downgrade my iOS as well.
Any ideas or suggestions are welcome.

Ya i tried that (see above). No such luck :(. Thx tho.

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The problem I have can be explained with what has happened to me just today!
I was sitting in the back garden and wrote two emails. (Normally my EE Brightbox router will allow me to use wifi in the garden so I thought it safe to send them.)
Wrong!
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