Yep, just replace the original password for "password" and pixelate that, if it really must look like a real password. And make sure to never use "password" as a real password, but that's a different level of shooting oneself in the foot.
Or replace the original password for "password" and leave it at that.
I think this whole pixelation thing is just for making it look nice. I, personally, would just use something like asterisks without any pixelation.