I get the same error. I imagine it gives an ICQ error because AIM and ICQ are both owned by AOL and they are related (you can get ICQ messages through AIM and whatnot now). I think Kopete considers them related too...at least that's my guess.
I get the same problem with the password, and I'm wondering what the hell it is. The only way I have been able to get around it is to remove my AIM protocol (in Kopete Settings), add it again, and set the password. If I keep Kopete open and never close it, I don't have a password again. Next time I sign off and sign on I'll get the problem again.
Deleting kopeterc doesn't seem to help with this one...
I don't even use KWallet, but I tried to check it out anyway. I see that my password is being limited at 8 characters, and I change it to what it's supposed to be, but every time I try to connect AIM in kopete it says my password isn't saved, I have to re-enter it, and it limits at 8 characters (in kopete)...wtf!
I messed around with the combination of Kopete and KWallet a bunch more and finally (I think) managed to get it so that my password issues are straightened out...thanks again!