I'm pleased that the discussion is open again.
May I ask the Server Security team to clarify what it means "1. has a security 
impact on the server where no other application gives password feedback."
Where does the security issue lie? I can't imagine a case, where anyone or any 
program could see the asterisks but not be able to register at least the 
keyboard-strokes.
And if it is, wouldn't it be enough to be able to disable it for the ones who 
care about such fine grained security. Ubuntu is anyway not the safest server 
environment with much features enabled by default.

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Entering password in Terminal gives no visual feedback
https://bugs.launchpad.net/bugs/194472
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