If the users have not ticked 'remember me' when they logged into the forum then they will get asked to login as flashchat needs to read the cookie for auto login (Why the hell did they change the default to not ticked in 3.5 - very bloody annoying).
If they get the login screen and then the incorrect message then you could have entered the wrong licence code in the CMS file (I have seen several with the customer number, not the licence code).
Or, of course, you could have screwed up ........
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