In web.config there is a section called "AspNetSqlMembershipProvider" and it kind of looks like this:

<add name="AspNetSqlMembershipProvider"
    type="System.Web.Security.SqlMembershipProvider"
    connectionStringName="SiteSqlServer"
    enablePasswordRetrieval="true"
    enablePasswordReset="true"
    requiresQuestionAndAnswer="false"
    minRequiredPasswordLength="7"
    minRequiredNonalphanumericCharacters="0"
    requiresUniqueEmail="false"
    passwordFormat="Encrypted"
    applicationName="DotNetNuke"
    description="Stores and retrieves membership data from the local Microsoft SQL Server database"/>

You can change the way the passwords are saved by setting passwordFormat="Clear".
You can also see there are some other interesting properties to set here, like:

• the minimum required password length
• requiring unique e-mail addresses for registration
• requiring a question and answer before password retrieval
• enabling/disabling the option for the password retrieval service
• enabling/disabling the option for password resetting

One word of caution is that the settings are global, so they will apply to all portals in the installation.