Customer login issue is just because of 'form_key' value. 
So , to avoid this error open your login.phtml file and place the below code under form tag - 
<input type="hidden" name="form_key" value="<?php echo Mage::getSingleton('core/session')->getFormKey(); ?>" /> 
and now check your login process. 
I think this may help you....:)
                       
                    
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