Interesting premise. I think the original behavior is partly correct. The combination of user name and password doesn't match. Either one could be incorrect. Say my usual login is steven@example.com, and I do know my password. If I try to log in as stevon@example.com with my correct password, it is conceptually NOT the password that is incorrect. The user could legitimately make such typos, and should probably check both fields.

On the other hand, this is a reasonable argument for prompting on invalid user names, e.g. "This doesn't appear to be an existing account, make sure you typed it correctly, or try our [sign up page]".