Does the same issue appear when using username@domain format? Also, could you provide the hostd logs after there is a login failure?
Have you checked keyboard layout ? As you said when choosing Window's Session cred its working fine it means identity source working fine. For testing you should put password at the USERNAME filed and check if it is being type correctly and system isn't picking different characters as per keyboard layout.
after change from 5.5 to 6.0 we also must user domain.suffix (in example .local) \username.
Before the we could used domain\username