For example, Facebook has a central ID and if they don't protect the password that gets exposed, someone could use the password to withdraw money from another section of the website.
This extension is helpful because people reuse passwords: a leaked password cannot be used to causes damage on other sites.
Obviously, I agree that sites shouldn't store passwords in plaintext, but good luck enforcing that.
Nitpick: works great until you move domains, or try to log in from another subdomain, or use a redirect in your /etc/hosts file, etc., etc.
Assuming that the submitted hash would (should!) be salted and hashed again server-side anyway, simply running it through bcrypt would be enough, I think.
An optional attribute could be added, too: <input type="password" salt="sosasta" />. If we wanted to go further, the salt could be a randomly generated nonce that would be submitted as another field; POST['password'] = 'whatever', POST['password_salt'] = 'sosasta'