I keep getting this error:

4S123/1 The Mandrill credentials you supplied appear to be invalid or incorrect. Please check your Mandrill Username and Mandrill API Key and try again.

However, Mandrill works with my Wordpress installation just fine. It is failing only with IPB

Have you put your API key (from Mandrill) into the 'password' box in the ACP ?

 

No, that seems pretty odd though, never saw anything saying that I needed to do that.

EDIT: Do you mean for the SMTP settings? If so, yes I did that. However, I was not looking at the ACP settings, I was looking at the Mandrill integration settings...

By password I mean SMTP password in the Email settings.

If you are struggling with this (as you cannot really post the details in public here) take a screenshot of your Mandrill settings page with the specifics then submit  a ticket here in the Client Area and include the screenshot (as the tech won't be able to login to your Mandrill account to check this) , this way they can tell you if what you have entered into your ACP Email settings is correct or otherwise.

One other thing you can check too. Go to your IPS4 ACP. In the search box in the top right type in 'error'

From the list choose 'Email Error Logs' , any errors logged here are email specific related and they may provide the answer. But if you are struggling / not sure please submit a ticket for initial assistance.