This is what I have done (VE - centos-4, HN - centos-4, arch x86)
HN# vzctl set 700 --userpasswd root:qwe
Starting VE ...
VE is mounted
VE start in progress...
Changing password for user root.
passwd: all authentication tokens updated successfully.
Stopping VE ...
VE was stopped
VE is unmounted
HN# vzctl enter 700
VE is not running
HN# vzctl start 700
Starting VE ...
VE is mounted
Setting CPU units: 1000
VE start in progress...
HN# vzctl enter 700
entered into VE 700
VE# su
VE# exit
exit
VE# passwd root
Changing password for user root.
New UNIX password:
Retype new UNIX password:
passwd: all authentication tokens updated successfully.
So, for me it works. Can you give me an access to the node in question?