Saving and rectreiving passwords to keychain had been working but version 2.8.2 (3346) with OS 10.5.1 has broken keychain again. When I login to an existing bookmarked site, I am asked again whether I want to save to keychain. Yes I answer. And then next time I restart computer and launch cyberduck, I'm asked again. this is really getting frustrating.
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This may as well be closed as the problem had to do with an incorrectly set preference. I do not know how the preference became deselected but it was. Since enabling Keychains again, things seems to be working normally.
Please see (http://version.cyberduck.ch/changelog.html). Additionally, delete any passwords in the Keychain of the server you are trying to connect to. To modify saved passwords in the Keychain, open /Applications/Utilities/Keychain Access.app.