personally i'd do this:
$query = 'UPDATE people SET password=(MD5("'.$pwd1.'")),decryptpass="'.$pwd1.'" WHERE firstname="'.$f_name.'" AND surname="'.$_name.'"';
this will actually echo out the query you are sending to the database
if that looks correct, then you have a permissions problem, or the fields are expecting a different data type or whatever. what does it actually echo out?
here's what is happening at the moment with your permatations...
the "Unexpected T_VARIABLE" error: you've not used the quotes properly.
no error message, but no update to the db: the query is being sent to the db and is being run, however it doesn't do anything (maybe you haven't entered a different password or you are tying to enter invalid data or you don't have permission to do it)
I get 'Could not change password: this is your own error message which is written to the page because the query is malformed and did not run properly