How are you encrypting the passwords now? GMail doesn't do this by default so I'm just curious as I was going to do this myself at one point. I have since set up GMail to access existing pop3 accounts so that's not an option for me anymore.
Even if the encrypted password was displayed for the user to type in, I doubt it would do much good as it would then be encrypted again when comparing and would not validate. You would definitely need a custom plugin to do what your after.