Well first of all the passwords are stored in an md5 hash, so you're not really sending the password, you're sending the hash of the password, and second, you could send it over an encrypted connection, which would of course make the entire process even slower.
I knew they were stored as a hash, but those are certainly not bulletproof. When sending information like ADMIN passwords (particularly the ROOT ADMIN who might be dumb enough to use the same password for the site, no offense Latro) you need to be extra careful. I have read about this being a large security vulnerability in PHP. One that should be protected against.
It may be nearly impossible to exploit though. I don't know. Ask Jake.
Jake's idea is great one. If you did this you should try that.