I noticed this as well, but I believe it was something of a coincidence. It seems that Beautiful widgets gets it's weather info from the Google weather feed, and that feed was down for quite some time. I have the google weather widget on my igoogle page, and it was reporting the same wrong weather as beautiful widgets was. If I clicked on the igoogle widget, it showed the correct weather from undergroundweather, but only if I clicked on it. The feed itself wasn't updating. Once the feed started updating again, I noticed that Beautiful widgets was also updating.
I at first thought it was a problem with BW, but after digging further, I found reports about the google weather feed.