I just checked, apparantly the bug has been fixed upstream about a year ago...
I tested it locally and I can't seem to find the password stored locally 
anywhere.

** Changed in: rhythmbox (Ubuntu)
       Status: Triaged => Fix Released

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https://bugs.launchpad.net/bugs/42686

Title:
  audioscrobbler password saved as plaintext in gconf

Status in The Rhythmbox Music Management Application:
  Expired
Status in “rhythmbox” package in Ubuntu:
  Fix Released

Bug description:
  When saving a password for audioscrobbler, it is saved in .gconf
  unencoded.  It appears in

  /home/kevinly/.gconf/apps/rhythmbox/audioscrobbler/%gconf.xml

  I realize that you should use different password for different
  websites, but some may inadvertantly set the user's (and thus su)
  password for their audioscrobbler password.

  A better option would be to store the md5 of the password instead
  since that is all last.fm requires for authorization. An optimal
  solution may be to use gnome-keyring instead of gconf.

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