Note: if you are here looking for a guide on configuring FBA in SharePoint 2010 the following are good resources:
Although there are a number of possible reasons for this error in the Event Log (the obvious being an incorrect username and password), there are some that just baffle you as you believe it “SHOULD” be working and you have been over and over the instructions/walkthroughs.
My experience on this matter after completing yet ANOTHER walkthrough to check was that I hadn’t realised the importance of the “ApplicationName” property. You must set this property to the same value (recommend “/”) in all web.configs, as some providers use this to partition user data for different applications, especially the SQLMembershipProvider!!!
Schoolboy error I know!