The userloginbar.module line 73
$output = '<div id="user-login-form">'. $output .'</div>';
The Form contained within this code already has id="user-login-form", so wrapping it with a DIV with the same ID causes a validation error.
I changed this to:
$output = '<div id="user-login-form-container">'. $output .'</div>';
I'm not 100% sure if it works this way with only Drupal base + userloginbar, but it seems likely.