This has got to be the most annoying error message that I have come across in the recent past and I only managed to find a workaround to the issue and not the actual direct solution which sucks and is very disturbing!
Anyway, I was trying to configure my new MD3200i storage array with its new name and the Ip's (the usual stuff) but when I reached the last screen where you click finish and accept the damage you have configured it kept giving me this error message:
"configuration aborted authentication failed bad auth parameter"
I tried almost everything. I was not using CHAP so didn't make sense and also since this was a new array it did not have a storage array password, I tried disabling ipv6, tried assiging ip's manually then used dhcp but nothing worked until I decided to dump the MDSU (Modular Disk Storage Utility)and use MDSM (Modular Disk Storage Manager) to configure the array.
I hope this helps, even though its not a direct solution like I said it a good enough workoround..