When we do an analysis on something like this we assume the method of encryption is fully known. Otherwise it's called 'security through obscurity'[1]. If this method got popular at all crackers would automatically start checking all hash-like passwords.
I'm also completely ignoring what would happen if that site were compromised. A little javascript snippet could just forward all passwords to the hacker's server. Even a browser extension could be compromised if it auto-updates. These are implementation details though that could be fixed/worked around.