I've just tried the latest stable and latest beta, and the following occurs in both.
If I select the server from Connect > Servers, then connect, it properly authenticates. If I connect to the same server using /server <host> <port>, it tries to authenticate using that entry's details, however it fails to authenticate. mIRC appears to be sending the correct password prefixed with LM0?LM1?. I confirmed this was the case by changing the server entry's password with an incorrect one, and that incorrect password was used to authenticate when calling /server <host> <port>.
A workaround using /server is to place the server in its own group, and connect to it using /server <groupname>.
If it helps any, I think I was using mIRC 7.45 or 7.47 prior to recently upgrading to 7.49, which introduced the authentication woes covered by this thread.