I've just tried as you suggest, but here is what's happening.
The false credential technique ( I tried all 3, but found the wrong sendpath to work) has managed to stop an email, but it's stopping the one generated by CB rather than from Joomla. As a result the temporary password is incorrect as the one generate by CB is the valid one.
While there are plans to move up to Joomla 3.x, I need go this route in the short term.
Joomla falls back to phpmailer if any of the other methods fail. For that specific notification though you can disable it in Extensions > Plugin Manager > User - Joomla! and set "Notification Mail to User" to "No".
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