Drupal Ajax Form Cannot set default value
I was not able to set the default value using ajax in drupal forms. The reason apparently is that you first have to unset any existing values in the field and then set the default value.
ie before setting $form['element_name']['#default_value'] you have to do unset($form_state['input']['textfield'])
It is clearly mentioned in the drupal documentation but it is easy to loose sight while developing.
Source: http://drupal.org/node/1082818#comment-6398920