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An improvement that Mithrandir and I discussed a while ago was something like this:
encrypted_password = md5(secret_key . md5(cleartext_password))
secret_key would be an installation-specific passphrase, probably defined in mainfile.php. Of course it should be suitably complex, e.g. a 64-character string of random characters
This method could be added to an existing XOOPS database, without resetting the existing passwords, since md5(cleartext_password) is what's already stored in the database.
The outer encryption wouldn't necessarily have to be md5; it could be SHA-256, if you have the code available to compute that:
encrypted_password = SHA-256(secret_key . md5(cleartext_password))