the usermod command can use an encrypted password
--- /usr/lib/user-setup/user-setup-apply 2008-08-09 21:35:55.000000000 +0200 +++ user-setup-apply 2009-05-19 11:25:21.000000000 +0200 @@ -29,13 +29,12 @@ USER="$1" PASSWD="$2" if [ "$3" = true ]; then - OPTS=-e + $chroot $ROOT usermod --password=$PASSWD $USER else - OPTS=-m - fi - $chroot $ROOT chpasswd $OPTS <<EOF + $chroot $ROOT chpasswd <<EOF $USER:$PASSWD EOF + fi } # Enable/disable shadow passwords.