Possible, but still awkward. If the network failure is between the server and the password database, it would still need to distinguish between "password permanently incorrect" and "password temporarily incorrect".
But my stronger point was that there is no need to speculate, since someone with an iPhone can verify what actually happens. Set up backups, change the password, verify that it fails, change the password back, and report what happens.
If the HTTP status code is 5xx, keep the password. If the HTTP status code is 4xx, delete the password.
Obviously making some assumptions (like HTTP, or a 5xx on network fail between internal services), but telling the difference between "user supplied bad data" and "the server messed up" really isn't that awkward at all.
But my stronger point was that there is no need to speculate, since someone with an iPhone can verify what actually happens. Set up backups, change the password, verify that it fails, change the password back, and report what happens.