Why is , PWDCOMPARE is returning 0, when it should be returning 1?

It's returning 0 because PWDCOMPARE is hashing the clear text password you're passing in with an algorithm that is not SHA2_512.

You can see this yourself by doing this:

DECLARE @Original nvarchar(128) = '1';

DECLARE @Hashed varbinary(128) = HASHBYTES('SHA2_512', '1');

SELECT PWDENCRYPT(@Original) AS 'PWDENCRYPT Hash';
SELECT @Hashed AS 'SHA2_512 Hash';

SELECT PWDCOMPARE(@Original, @Hashed);

You should only use PWDCOMPARE with a column that was encrypted with PWDENCRYPT.

You should NOT being PWDENCRYPT anymore. Use HASHBYTES instead and compare against the column value yourself.