Login keychain password not working for Transparent network proxy.

The message “Transparent network proxy for Apple system services wants to use the ‘login’ keychain” is a keychain-access request.

The exact cause of the request on your Mac is not established from the message alone.

Since entering your password does not appear to do anything, open Keychain Access using Spotlight and select login in the left-hand sidebar. 

Apple states that the login keychain password is normally the same as your Mac login password.

If the login keychain is locked, try unlocking it with your Mac login password. 

If you have previously changed your Mac login password, the keychain password may be different; Apple says the previous password may then be required.

I would not reset the default keychain at this stage. 

Apple notes that doing so deletes the passwords stored in that keychain and recommends manually resetting it only when advised by Apple Support.

If the login keychain is already unlocked, or unlocking it does  not stop the popup,  let us know. We can then identify what is requesting access without deleting or changing anything in the keychain.

Apple's Keychain Access User Guide for macOS Tahoe is available here: Apple — Keychain Access User Guide

Apple's relevant documentation is here:

If your Mac keeps asking for your keychain password

If you're asked for access to your keychain on Mac

If you need to update your keychain password on Mac

The popup means that a system process is requesting access to your login keychain. 

Since you can see that the keychain is already unlocked and entering your password does not appear to do anything, I would avoid resetting the keychain for now.

Open Keychain Access from Spotlight and select login. 

If it is unlocked, leave it as it is. 

Apple notes that repeated keychain-password requests can occur if the keychain becomes locked or if the Mac login password and keychain password are out of sync. Apple: If your Mac keeps asking for your keychain password

If you have recently changed your Mac login password, that possibility is worth investigating. 

Apple explains that the login keychain normally uses the same password as your Mac user account. Apple: If you need to update your keychain password

I would not use “Reset Default Keychains” at this stage. 

Apple says that resetting the default keychain deletes the passwords stored in it and recommends manually resetting it only when advised by Apple Support. Apple: Reset your default keychain

If the popup continues, the next useful step is to determine exactly what is being requested. 

In Keychain Access, search for transparent and proxy and let us know what entries appear. Do not delete or modify anything yet.

Apple's documentation on keychain access may also be useful: Apple: If you're asked for access to your keychain and Apple: Keychain Access User Guide.