Hi RocketTendon,

DNN Modules typically rely on DNN authentication services.  These services are provider-driven, so the framework may be tweaked to use most any authentication system out there.  Out of the box, DNN uses ASP.NET authentication.  Any external applications that either rely on ASP.NET authentication or are themselves provider-driven should play nicely with DNN.  And, because of the close relationship between a DNN module and the DNN framework, one rarely has authentication worries when dealing with modules that work within the DNN framework.

I have personally implemented a custom DNN authentication provider for both legacy applications and Commerce Server's UpmMembershipProvider, so I can directly vouch for the ability to support flexible authentication requirements.

Bottom line: any module working WITHIN the framework (core forums, core wiki, modules designed for DNN) are zero worry.  Coordinating with applications OUTSIDE of the framework require  more work, but flexibility exists to accomplish such a task.  Most sites ultimately migrate all functionality into DNN.

DNN supports md5 encryption because ASP.NET supports MD5 encryption.  Passwords can be configured at the web.config level to be encrypted in this manner (though I always vote for hashing). 

Hope this helps!

Brandon