Errors with Update Attributes

qw498.rb

User Model
==========
require 'digest'
class User < ActiveRecord::Base
    attr_accessor :password

    has_one  :profile
    has_many :articles, :order => 'published_at DESC, title ASC',
                        :dependent => :nullify
    has_many :replies,  :through => :articles, :source => :comments
    
    validates :email,   :uniqueness => true,
                        :length => { :within => 5..50 },
                        :format => { :with => /^[^@][\w.-]+@[\w.-]+[.][a-z]{2,4}$/i }
    validates :password,:confirmation => true,
                        :length => { :within => 4..20 },
                        :presence => true,
                        :if => :password_required?
                        
    before_save :encrypt_new_password
    
    def self.authenticate(email, password)
        user = find_by_email(email)
        return user if user && user.authenticated?(password)
    end
    
    def authenticated?(password)
        self.hashed_password == encrypt(password)
    end
    
    protected
    
    def encrypt_new_password
        return if password.blank?
        self.hashed_password = encrypt(password)
    end
    
    def password_required?
        hashed_password.blank? || password.present?
    end
    
    def encrypt(string)
        Digest::SHA1.hexdigest(string)
    end

end

CONSOLE
=======
ruby-1.9.2-p180 :001 > u = User.find(5)
 => #<User id: 5, email: "me@example.com", hashed_password: "password", created_at: "2011-07-26 10:03:41", updated_at: "2011-07-26 10:03:41"> 
ruby-1.9.2-p180 :002 > u.update_attributes(:password => "password", :password_confirmation => "password")
 => false 
ruby-1.9.2-p180 :003 > u.errors
 => {:email=>["has already been taken"]} 
ruby-1.9.2-p180 :004 >