I recently had to move several databases from one server to another and ran into a problem with transferring the SQL logins. If you take a look at SQL 7 Books Online for sp_addlogin, it explains how you can use it for transferring logins by setting the optional flag @encryptopt to one of two values; skip_encryption if the password has already been encrypted, or skip_encryption_old if it was encrypted with an older version (with a note to be used for upgrades only).
So based on that, I moved all of the pertinent logins using sp_addlogin with @encryptopt = skip_encryption. No problem so far. Then I detached the databases from the old server, copied to the new server and attached, started testing. Some of our apps worked, some did not because the login failed. I double checked that the encrypted password in syslogins matched on both servers - they did. So what???
It turns out that the sysxlogins table has a column called xstatus which indicates how the password was encrypted. It is set to 2050 for SQL 6.5 logins, to 2 for SQL 7 and SQL 2000 logins. All of the ones that were failing had an xstatus of 2050 on the old server, but an xstatus of 2 on the new server. Eureka!
Whenever someone tried to login, SQL was encrypting the provided password with 7.0 encryption and comparing it to the encrypted password in sysxlogins - which had been encrypted by SQL 6.5. In hindsight this makes sense. In order to upgrade the passwords they would have had to
ship code that could decrypt a stored password - not a good idea!
MS has a script posted for moving logins that accounts for the two different xstatus values:
If you're moving logins, you'll want to read this article as well: