The administrator password is present within the server.xml and within the system partition. This is the case to require authentication to startup the server with access to the data therein. The problem is you cannot maintain the admin password in this file in hashed form. When authenticating it will get double hashed. So either on startup and on internal admin authentication you bypass hashing and only do it through the protocol or we need to force keeping the admin password in clear text.
This is not such a good thing IMO. Something must be done for this.