Did a test signup of a blog just now. I have the Set Password on WordPress Multisite Blog Creation plugin and the following that has to do with signup
Bad Behavior (not sure if its for signup)
Select Language At Signup - Now that I'm thinking about it This is network activated and it did not ask me
Set Blog Description on Blog Creation
My Problem It did ask me for the Password twice and after I got the confirmation e-mail and I clicked the link - Actually I copy and pasted it into IE9 since I was logged in to a Firefox browser with Network admin
Then it showed on the screen my username and Password that was system generated. and the Password I picked didn't work the system generated one did work.