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

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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