I've reproduced the original problem on the released Hardy 8.04 iso images, and verified that grub-install properly writes the password line into menu.lst using the 8.04.1 daily iso image (from 20080612.4).
I've reproduced the original problem on the released Hardy 8.04 iso images, and verified that grub-install properly writes the password line into menu.lst using the 8.04.1 daily iso image (from 20080612.4).