Encryped vs non encrypted passwords

[Phil Yurko]

Guys, I'm experimenting with encrypted vs non encrypted passwords on Windows 
98.  Maybe I'm missing something but here's what I did

set up a samba server version 2.0.7 on a solaris 7
basic config with encrypt passwords = no

on the windows 98 box I've edited the registry as described in the 
docs/textdocs part of the source.

When I try to connect using the above config I can't log on.  Using snoop I 
can see that my password is being passed in plaintext.  If I change the 
registry back, reboot and change encrypt passwords above to yes on the server 
I can log on fine.  Can someone tell me what I'm missing.

Thanks,
PhilY