Security is about tradeoffs. How bad would it be if someone else got this information? How helpful is it to me to give it to this third party? Wireless passwords are a huge pain: visit someone's house, ask them for their password, and then feel guilty while they look through various papers to find a long string of hex digits which are so annoying to enter on the phone. This pain makes the tradeoff well worth if for me (and I suspect for nearly everyone) when balanced against the low risk of Google doing something nasty with the saved passwords.

(Disclaimer: I work for Google, but if I had an iPhone I'd want the same functionality.)