On my first playthrough I got the password right on first few attempts, but I got curious to what would happen if I got it wrong so I went back; but nothing actually happened so at the time I just assumed that Thanatos was lying or something?
I did see the scene of Tyson killing Orly by failing the password though, but it only worked for me on the paths where I reveal Oswin.
I wondering if it's a bug and perhaps I should reinstall the game..