in reply to editing a file with regular expressions

I think you missed to save changes ;-) try this, ( but on a backup it edits the file inplace ):
perl -i -pe 's!(xdbns=.jabber:iq:auth.>)[^<]*(</password)!$1your_passw +ord$2!g' your_user_file.xml

Update: I messed up the regex

Boris