Interesting log - it looks like the root cause of the issue is that the favourite has a password associated (and stored in the keychain), but for some reason the tunnel assistant can't access that password. You can see it trying but failing: "SequelProTunnelAssistant[23955:903] SSH Tunnel: specified keychain password not found".
This might occur if the tunnel assistant has been denied access to the password in the past, or if the keychain item itself has been corrupted in some way. I'm not sure what else could be causing it if the connection interface is displaying password blobs (••••).
The failure to then prompt you for a password is probably related - it's error-ing rather than falling back to a prompt, which we'll fix.
When you've removed the favourite's password and reentered it in the past, has that been in prefs, or only (temporarily) on the connection screen? It might be worth managing favourites in the prefs, removing the password, closing prefs, and then going back and adding it again - that should recreate the keychain item, and hopefully fix the issue...
Rowan
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Does the favourite name have any non-latin characters in it? That could also be a potential source of issues, come to think of it, as the name gets passed into the tunnel assistant as an environment variable...
--Rowan
Thanks for the pointer on the ä - I've replicated that, so we'll get that fixed for the next version :)