One thing I would like to make sure of is that Moodle 2.8.1 is not saving passwords in the moodle database.
There is some confusion in the documentation regarding this.
The instructions say this:
Hide passwords As you don't want to store the users's password in Moodle's database, choose Yes here.
But the config page says this.
Cache passwords Select yes to prevent passwords from being stored in Moodle's DB.
It kind of seems backwards. I would think caching the passwords is putting it in the moddle db.