With this method the external authentication is never checked after the first time. This means if the password is changed on the "central"
database (ie the external one) then it will never updated within Moodle. This pretty much defeats the purpose of having one password for multiple systems.
The problem in this particular case seems to be with the popmail service (which I realise is probably not under your control).
Even given a perfectly working service, using multiple sources of authentication can lead to problems because the namespaces are not guaranteed to be unique. This leads to some complexities ...
For example, say you were to use POP first, then fall back to local. Say there is a local teacher account called "fred". Later, a new student is added to POP called "fred". When he logs in, his account will overwrite the local "fred" and the teacher's password will be lost.
That said, I agree it would be nice thing, it will just take some work, that's all.