I just switched to the Old Password stuff myself. But you need not do that, there are other options.
Yeah it's just more BS you have to deal with when upgrading.
http://dev.mysql.com/doc/refman/5.0/en/old-client.html
*
Tell the server to use the older password hashing algorithm:
1.
Start mysqld with the --old-passwords option.
2.
Assign an old-format password to each account that has had its password updated to the longer 4.1 format. You can identify these accounts with the following query:
mysql> SELECT Host, User, Password FROM mysql.user
-> WHERE LENGTH(Password) > 16;
For each account record displayed by the query, use the Host and User values and assign a password using the OLD_PASSWORD() function and either SET PASSWORD or UPDATE, as described earlier.
PHP-
Note: In older versions of PHP, the mysql extension does not support the authentication protocol in MySQL 4.1.1 and higher. This is true regardless of the PHP version being used. If you wish to use the mysql extension with MySQL 4.1 or newer, you may need to follow one of the options discussed above for configuring MySQL to work with old clients. The mysqli extension (stands for "MySQL, Improved"; added in PHP 5) is compatible with the improved password hashing employed in MySQL 4.1 and higher, and no special configuration of MySQL need be done in order to use this MySQL client library. For more information about the mysqli extension, see http://php.net/mysqli.