This issue is resolved in VMware vCenter Server 7.0 Update 3e (build number 19717403).
Please note that the workaround steps below are still necessary to correct the vpxuser password, which causes other issues such as HA agent deployment failures.
Workaround:
To work around this issue, you must disconnect and reconnect any hosts that vCenter is no longer able to login to with vpxuser. Reconnecting the hosts will require entering root credentials.
1. To generate a list of affected hosts, connect to the vCenter Appliance via SSH and run the following command:
journalctl -b | grep "HostSyncFailedEvent.*Cannot complete login due to an incorrect" | awk '{print $(NF-11)}' | sort | uniq
2. From the vSphere Client, disconnect and reconnect each of the hosts listed. The reconnect will initially fail with an invalid credential error, where you are then guided to re-entering in the host's root credentials.