I believe this problem also exists in Hardy.  Following is a log message
that illustrates the issue:

Aug 14 12:34:57 ubuntumailsvr dovecot: auth(default): sql(***USERNAME
OMITTED***,127.0.0.1): CRYPT(trader) !=
'$1$crGRJM.l$WFcCPMqyDT1AB9gkkdnyN/

Using a PHP function, I can feed the password and hash in against the
CRYPT() function for a successful match.

-- 
Dovecot Plain auth broken in 1.1.1, fixed in 1.2.1
https://bugs.launchpad.net/bugs/398733
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