The password is encrypted, but a new password needs to be entered in plain text. After saving the new password you will be logged out (by any activity) and can log in with the new password again.
The price for the extra security by the encrypted password, is that you no longer will find the password in config.php.
If you have forgotten the password, you have to reset it to "text".
You have to download the file ./cmsimple/config.php via ftp and open it on your PC, with a code editor, that is able to save the file as utf-8 without BOM (Byte Order Mark).
Then set the variable $cf['security'] ['password'] back to the original value of "test":
Then you upload the config.php back to your server, login with the password "test" and enter a new password.