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Authentication errors on initial setup of plugin development for CRM 2013 online

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I've installed VS2012 and SDK for CRM 2013.  I've installed the developer tools from the SDK and attempting to create an example plugin (for CRM 2013 online).  When I create a new project from templates/Visual C#/Dynamics CRM, the dialog seems to connect to the server OK, but fails the user authentication / login.  It's the same username and password I log into the CRM with and the user has admin rights.  If I click cancel on the dialog, the project still get's created, but I assume, missing the authentication details. Any ideas why authentication would fail?

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