Add this before or inside the <form> tag or in the <head> tag
Code:
<script type="text/javascript" src="vbpath/clientscript/vbulletin_md5.js?v=373"></script>
to load md5hash javascript function referenced by onsubmit attribute. With this passwords are sent in the form of md5 hash like in built-in login form.
You also need to set proper vb version in the url (v=373 is for vb 3.7.3).