I'm a n00b, but..
Question..
How do you know that unlocking doesn't work? - you need no unlock and then disable the autolocking.
After that use the linux tools for locking: 'lockhd -a', with your eeprom.bin in the eeprom folder (if needed, re-burn a linux cd for this with your key in the eeprom folder)
I've found the dos tools extremely buggy in the sense that they are too far from foolproof.
E.g. the 'passwords' asked for are in fact not passwords but lock keys. They are not the same. In fact if you use the linux tools, it will say something, implicating HD locked with key from eeprom.bin with password 'XBOXSCENE'. The XBOXSCENE is the backdoor.
This means that you cannot simply enter any password, it will convert them to some unknown hex-values, only known by the dos tools. The good point is that the values are not garbage and the originally entered password can be used to unlock the drive. However the auto-locking mechanism will kick-in afer a reset/poweroff/reboot.
Also the DOS tools don't echo if you succeeded or not. They simply say 'done'.
About the password you used.
You pressed CTRL+C which should end up as a single character. The DOS tools are adding a '0' to that to make the so-called password even. You can use a good hex/texteditor and find out what what value corresponds to that character you see in the textfile and either re-use the CTRL+C as password or use ALT+value (keypad).
E.g. 'Ω' corresponds to ALT+234 (pressed on numlock and keypad).
I've gone through the same SweatOnMyBack using the DOS tools and my Maxtor 250GB.
But perhaps my case was different.