Still have this problem with 1.7.1.
@William it sounds like you have a slightly different issue, but it could be related anyway due to changes in the network libs.
Quoting one of the commenters on MC-34947: this describes my situation:
"I can consistently produce this error by successfully logging into the server, clicking disconnect, and attempting to reconnect to the same server. The screen pauses at "Logging in..." and then gives this error when the login times out."
Thanks for reopening the original issue. It wasn't clear to me if comments on that one would be noticed!