If its not changing in the db it sounds like a bug. However I can't produce it here running the latest code. Any more info about your environment, db platform IIS version, medium trust or full?
I agree with your reasoning about the risky user behavior such as using the same password across sites, but its not for me to decide, I leave it up to site owners.
Generally I try to encourage use of OpenID or Windows Live ID among users in which case we don't have their passwords at all and they can use the same one across supported sites.
Not being able to recover a hashed password is a feature of using hashed passwords, however, we currently lack a usable alternative like the ability to reset it which is really needed for this case. The idea would be that the user can click the "I forgot my password" link and be able to send an email to their own account. The email would have a link with a code to allow the user to change his password without knowing the current password. The code would have a short expiration.
I plan to implement this as soon as I have time but I have a lot of irons in the fire at the moment.
Best,
Joe