i don't know what database you're using, but for MySQL (the one that seems to be most popular on these boards), you should be storing an encrypted version of the password in the database. This is one-way encryption which cannot be reversed; thus, you shouldn't be able to mail the persons password back to them.
You could store an unencrypted version of the password, but if you do that, then there is no point in worrying about encryption between emails because you're not taking care of proper security on your server.
I'd store encrypted passwords in the database. If they lose their password, generate a new one.
Cgraz