"Would this solve my problems?"
Nope, you've broken the board. <img border="0" title="" alt="[Frown]" src="images/icons/frown.gif" /> You see, you have inserted in unencrypted password, but every other part of the board is still expecting an encrypted password. And should someone go into My Home and edit their password? it'll be encrypted again.
What you can do is either
A) make your other program use an MD5 password. Not fun probably.
B) go through every script in threads and make it use unecrypted password. Definately NOT fun.
C) add another column to the db (w3t_Users) for an unencrypted password. Leave what Rick has in adduser but add to it the insert for your unencrypted password for your other app into the new column. Make you other app read that column for the password. Considering that you have most of it already done I'd say that is far the easiest route.
Honor The Victims