as I mentioned before, having a keyring type solution would definately be more secure for this. i.e. encrypting the password file and opening it for logging in with a password. but then you'd have to type in the password every time you want to log in to anything. that done right would protect the passwords to a certain degree.

I guess hashing the password is a simple way to make people feel secure, and it does give some protection against opportunist laymen.