There are 2 other things you can check, but I would expect a different error. Still ..
1. Check the NetServer service in the System i. A profile CAN be disabled here, but still be able to use green screen, etc,
2. Check if the user has a mixed case password. I am at V7R1 and Win 7×64 and I still see this be a problem now and then.
I see you system is on an old OS (v5r4), but what version is iSeries Access? Have the latest SP’s been installed ?