Open the Airport Utility
Select "Disk Password", as opposed to "Device Password" as the password type for your TC.
Chose a password that you will remember and update the TC.
Connect to the TC via the finderOpen the Finder | Go | Network
Choose your TC device from the list
Click "Connect as..." button
It will prompt with a dialog that says: Enter your password for the server <TC Name>.
Open Terminal Window
Go to /Volumes/TCDirectory
Change sparsebundle File Password
Run the following command to set the password for the sparsebundle file:
sudo hdiutil chpass /path/to/filename.sparsebundle
Restore from Time Machine Backup
Restart your Mac
Press command + R when you hear the chime.
This will bring up the Mac OSX Utilities dialog window
Choose Restore from Time Machine Backup
Choose your TC | Choose TC disk backup name
It will ask for a password.
Enter the password you entered in the hdiutil command
Now, you will presented with a list of backups you can restore from.
It will take a long time (perhaps 4+ hours) to perform the restore.