I have logged a bug for the HTML Validation issue.
Dream weavers live view relies on your site settings, for live view to work correctly, you need to have the Site definition properly configured to connect to a testing server. Live View uses the testing server connection. However, live view is not totally reliable, it is not a substitute for testing in the browser. Testing the values that are set in the login page and debugging those values is better done in the browser than in live view.
to set more session variables, open the login page, go to the server behaviors panel (Window -> Server Behaviors) and double click the Security Assist Authenticate User behavior, on the session variables tab, click the plus button and select the columns from the users table you wish to store in session variables.
adding encryption to the passwords after the pages are created is problematic.
it is much easier to re run the wizard and add encryption in the wizard.