I have exactly this same problem showing the exact same screen. I reinstalled cb 1.2.3 and it made no difference. Here is my forgot login page
porsche356registry.org/component/comprofiler/lostpassword.html

Also, when you start typing the email, the button changes and just says "send username" although what it sends is the password. I can't figure out how to get it to send the username.

joomla 1.5.20
cb 1.2.3

OK, I have mine set to "username, email or enabled CMS authentication plugins". This is required by the phpbb3 bridge. Is there not a way to enable retrieving a lost username with this setting? Why?

Also, the behavior of the button is broken and the general message is confusing as the message mentions lost password but the button says "Send Username/Password". As I said earlier, when starting to type in the email address, the button changes to "Send Username" but when you click it, the email goes out with the password only. Something is just not right here. Any help is appreciated.
porsche356registry.org/component/comprofiler/lostpassword.html

Kyle's last suggestion worked for me.

Until your issue is resolved, you might consider the workaround I was using. It sucks but it was better than nothing. I'd moved the CB signin from the masthead area to a module position in the right margin. Just below it, I published a link to the Joomla default URL for retrieving username.

BTW, like your site. Don't have a Porsche but I can appreciate them. I have 2 German convertibles ('71 Karmann Ghia and an Audi S4 Cabrio). Maybe one day...

Thanks a lot Breezeboogie for the suggestion and I will try it as a workaround. But you're right, it does kinda suck and I'd still like some official response to the question of why the retrieval of username is not available with the setting below and about the button text being a bug and confusing - both of which I'd like to see fixed.