I ran into the same problem. Since my password and email address were correct, but it showed an error:
The Apple ID you entered is not found or your password was incorrect. Try again.
I solved this by adding a new sandbox tester on iTunes .
When you visit iTunes and go to myApps . On the myApps page , in the upper left corner of the page is a drop-down menu named myApps . Click on the drop down menu. There you will find the Users and Roles tab .
Click on it and then you will find the sandbox tester. Here you can add a new user to test the sandbox.