First, the Login problem - If everything was working in 6.0.1 and started failing after the 6.0.3 upgrade the most likely problem is that the assemblies have somehow gotten out-of-sync, or are cached by IIS. When making the upgrade you should re-save your entity models to ensure the generated code is current, then clean and re-build all projects, then publish/deploy to IIS. If the error recurs, check the debuglog generated by DevForce -- if the EntityServer couldn't be started the log should contain an error message.
The second issue - the ServiceReferences.ClientConfig file is not a requirement, since DevForce defaults may be sufficient. In your file the address for the EntityServer is incorrect, it's pointing to EntityService.svc and not EntityServer.svc. If you were using this ClientConfig in your original app with the Login problem, then this is the problem there too.