I think we have been missing the intentions of the poster in regards to the application he is trying to create, as leo has been saying that all that is required is a simple application authentication model which just happens to be utilizing a SQL Server database, whilst SQL Server uses mixed and windows authentication; for this purpose what is required is to store the application's users in a table with the passwords encrypted, this table as said before will store added information that SQL Server cant store using its built in security model.
What i have done when doing apps of this nature is to build my own encryption/decryption logic.
I would have a table say called users and another one called access_rights etc. When creating a new user I would simple say insert into users values ('username', encrypt(password), group no) etc.
When the statement is evaluated a function called encrypt is called to do the encryption.
My advise for you not wanting to display the password to the admin in the grid is to simply omit this field from the select statement used to populate the grid, and when it is time for the admin to create or edit a password simply display this data in a textbox with the passwordchar property set.
Here is a code segment of how I create a new user using the disconnected ADO.NET approach of using datatables.
Code:
Dim expDate As String = Today.AddDays(passExp).ToString("MM\/dd\/yyyy")
With dbDataSet.Tables("Admin")
Dim dr As DataRow = .NewRow
dr("FirstName") = Trim(firstName).ToUpper
dr("LastName") = Trim(lastName).ToUpper
dr("groupno") = Trim(CStr(groupLevel))
dr("expDays") = Trim(CStr(passExp))
dr("expDate") = expDate
dr("loginname") = Trim(username)
dr("passin") = Encrypt(password)
dr("delflag") = "N"
dr("createdOn") = DateTime.Now.ToString("MM\/dd\/yyyy")
.Rows.Add(dr)
End With
Obviously I cant post my encryption routine for security reasons but .net has several options built in