Hi H, thanks for replying. Well, we'll just try to pursue that, as a few of our users have been using the app. If we fail, we also face an upgrade to 2.8 (or above) during the summer, most probably on a different server, and starting from scratch, so things don't look too dismal in the long run.
Regards,
Przemek
In case anyone reads this, we finally resolved this issue on our latest 2.9.1 upgrade by restoring the password field properties to how they look in a standard Moodle mdl_user table:
Type: varchar(255)
Null : No
Defaut value: <empty>
Most likely, the last two settings were to blame - for some reasons ours had been Null = Yes and Default value = Null.
I think I stand corrected on what I wrote earlier. More likely, these two steps were critical: