I think it's a combination the "Justification 3" in the article (having passwords stick around in the clipboard could be an issue) and maybe the idea by some people that passwords should be memorized and never written down anywhere.

Maybe they're worried people will have a "password.txt" in My Documents where they store all their passwords in cleartext. That being said it'd still probably would be more secure than having the same password everywhere like most people seem to do.

The road to (UI design) hell is paved with good intentions.