An update... still haven't figured this out entirely but now I'm pretty confident there is at least 1 Jenkins bug.
I figured out a way to capture the temporary credentials file. When I looked at this, there were a couple of things that struck me.
1) it contained multiple credentials, both old and new.
2) when changing passwords using Safari 9 browser on a Mac, the credential file contained random garbage; i.e. it contained the field help text for the password field instead of the password.
3) the password credentials file does not appear to completely URL encode the password; characters '{' and '}' were not encoded.
Now if I don't select a credential, and correctly url encode the username & password in the SCM Repository URL field... it "works" albeit not exactly secure.
Any thoughts on how to fix? Mind you that this all works fine using the same entered credentials for SVN and only a problem with GIT. Also the odd thing is that old password contained both '{' and '}' and it worked fine for the last year.