Could be missing something but believe the solution was:
"So the solution seems to be to remove an old Google Account that was 
configured with a(n application-specific) password and add a new one with 
OAuth2 using your regular password (+ phone code) and allowing Ubuntu to access 
your account."

If so, doesn't that imply that a user would be forced to set-up 2-step
verification if they were not using it already? What about users that
don't have a phone to use with 2-step verification? From the
instructions on Google, understand that you can generate an application
specific password for Ubuntu and not require a phone, but what about
other applications that involve a Google account; would you not require
a phone for those?

Is this a correct assessment - if not, please could you expand upon the
solution?

For info: 
* Removed all accounts, checked seahorse and ensured any stored information was 
removed.  
* Re-created the Google account only. 
* Seahorse stores two entries, one containing the account password (right click 
> properties shows "signon-type: 1"). 
* The other entry appears to be urlencoded (right click > properties shows 
"signon-type: 3"). 
* Unable to see from seahorse source code where signon-type is returned from or 
what it suggests about the data stored (not a programming expert, did find the 
approximate place in seahorse-gkr-item-properties.xml where the graphical 
elements are defined, cannot see where the application gets the data though).
* Have attempted to urldecode the information stored, wasn't able to do this 
completely cleanly, and due to security concerns will not paste the whole 
string into this comment. 
* However, basic layout of data stored appears to be: 
Tokens<random_string>.apps.googleusercontent.com timestamp Py refresh_token 
Token <random_string>Expiry

A little research suggests this data may be being stored for use when creating 
an OAuth token, see also:
http://code.google.com/p/google-mail-oauth2-tools/wiki/OAuth2DotPyRunThrough

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You received this bug notification because you are a member of Desktop
Packages, which is subscribed to empathy in Ubuntu.
https://bugs.launchpad.net/bugs/1069531

Title:
  Cannot login to Empathy after setting up Google online account

Status in “empathy” package in Ubuntu:
  Incomplete

Bug description:
  Description:  Ubuntu 12.10
  Release:      12.10

  empathy:
    Installed: 3.6.0.3-0ubuntu1
    Candidate: 3.6.0.3-0ubuntu1
    Version table:
   *** 3.6.0.3-0ubuntu1 0
          500 http://gb.archive.ubuntu.com/ubuntu/ quantal/main amd64 Packages
          100 /var/lib/dpkg/status

  Expected behaviour:

  * New installation of 12.10 Ubuntu
  * Expected to be able to use Google Talk in Empathy after adding a Google 
account under Online Accounts

  Actual behaviour:

  * Account can be added successfully, however Empathy displays "Google Talk 
Account requires authorisation"
  * Clicking on the icon opens Online Accounts but does not offer an option to 
perform any further authorisation.

  Investigation:

  * Seahorse shows two entries for the Google account, one of which lists the 
correct password, the other of which lists a seemingly random collection of 
characters separated by percentage symbols
  * Checked Google account, Ubuntu has permission to access: Picasa Web Albums, 
Profile Information, Google Docs, Google Talk
  * Google account is not set up to use 2-step verification
  * Removed account and seahorse entries, set up from scratch
  * If possible, will use non-alphanumeric characters in passwords, so tested 
with only alphanumeric password - no difference
  * Not going through a proxy

  Activating empathy-debugger shows:

  wocky/-DEBUG: 21/10/12 11:22:20.784214: _end_element_ns: Received stanza
  * failure xmlns='urn:ietf:params:xml:ns:xmpp-sasl'
      * not-authorized
      * missing-username xmlns='google:auth'
  wocky/-DEBUG: 21/10/12 11:22:20.784320: auth_failed: wocky-sasl-auth.c:274: 
Authentication failed!: Authentication failed: not-authorized
  gabbleauthentication-DEBUG: 21/10/12 11:22:20.784421: 
gabble_server_sasl_channel_fail (server-sasl-channel.c:929): auth failed: 
WOCKY_AUTH_ERROR_FAILURE (#6): Authentication     failed: not-authorized
  gabbleconnection-DEBUG: 21/10/12 11:22:20.784534: connector_error_disconnect 
(connection.c:1760): Interactive authentication error, reason 3, dbus error 
org.freedesktop.Telepathy.Error.AuthenticationFailed

  So, it seems that seahorse has the correct password in place, and the
  Google account is set up in such a way as to allow the application to
  work. That being the case, it makes no sense to be getting an
  authorisation error, unless there is something else that isn't
  immediately obvious.

  Have checked for open bugs here:

  * https://bugs.launchpad.net/ubuntu/+source/empathy/+bugs
  * https://bugs.freedesktop.org/buglist.cgi?quicksearch=telepathy

  However nothing that matched this exact problem jumped out - a lot of
  issues seem to be with 2-step verification (but as mentioned earlier
  this has not been enabled).

  Asked for advice here:
  * 
http://askubuntu.com/questions/204062/cannot-login-to-empathy-after-setting-up-google-online-account

  Was advised to log a bug report.

  ProblemType: Bug
  DistroRelease: Ubuntu 12.10
  Package: empathy 3.6.0.3-0ubuntu1
  ProcVersionSignature: Ubuntu 3.5.0-17.28-generic 3.5.5
  Uname: Linux 3.5.0-17-generic x86_64
  NonfreeKernelModules: nvidia
  ApportVersion: 2.6.1-0ubuntu3
  Architecture: amd64
  Date: Sun Oct 21 21:21:36 2012
  InstallationMedia: Ubuntu 12.10 "Quantal Quetzal" - Release amd64 (20121017.5)
  ProcEnviron:
   LANGUAGE=en_GB:en
   PATH=(custom, no user)
   XDG_RUNTIME_DIR=<set>
   LANG=en_GB.UTF-8
   SHELL=/bin/bash
  SourcePackage: empathy
  UpgradeStatus: No upgrade log present (probably fresh install)

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