I have a similar problem too.
I installed a new fresh joomla 1.0.10 with last stable 1 CB
Create 5 new accounts.
When i try to change group level of a user i see the password only in the "verify pass" field (not in the "pass" field). When I press "save" I obtain an Alert who ask-me for the user to change the pass.
In anhother site i installed a fresh new ones too, but i translate the data of the older database to the new one. I have the same problem too. The two websites are inthe same server.
This is the info.php of this server:
afpg.org/nfo.php