Can't replicate that. Set password to password on interfaces.php for the interface, saved, applied changes.
# grep password /var/etc/mpd_opt1.conf set auth password passwordChanged password on interfaces.php to asdfasdf, save, apply changes.
# grep password /var/etc/mpd_opt1.conf set auth password asdfasdfSame if changed under Interfaces>assign, PPPs tab. Works fine. Also connects fine where I change the password PPPoE server side.
The mpd_<interface>.conf file in /var/etc/ is the only location that resides on a running system. The data that creates that file is in your config.xml. If there's some scenario you can replicate, please post back info.</interface>