I know how it feels when steam does not work. I currently have steam running on an external hard drive on a windows XP partition on my mac. This works really well by the way i can't see any performance loss as a result of doing this despite what i thought would happen when i first tried this. Although seems i have run into a problem with the latest update and not being able to apply a skin properly and i don't know if that has anything to do with the external hard drive. Anyway if anyone else runs steam off an external hard drive like me and knows what might be the problem then let me know.
As for your problem it does not look like steam is the problem infact its more likely that its windows vista having a spack about something. I would suggest disableing any windows vista security features and firewalls to see if this makes any difference. It does not sound like someone has stolen your account otherwise it would come up and say something along the lines of "username and password are incorrect".
Also you might like to try this link http://support.steampowered.com/cgi-bin/steampowered.cfg/php/enduser/home.php
and see if you can find a solution to your problem on there.
goodluck with your problem,
Lasher