When I try the "Forgot Passord?" it tells me it has sent an email but I don't receive one?
I have checked through the related forum discussions and have fixed my email setting, tried the test email and that works fine. I also checked the password recovery template and it is checked as active.
I had the same problem and it turned out that adding images through the HTML editor somehow messes up the messages, try using a only text template to see if the message is sent.
This problem is due to some security issues by mail hosting providers. Try with some other email host. Gmail is not allowing to send emails using 3rd party applications due to some security risks.