A question about passwords and login/authentication

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I have heard that many *nix flavors used to default to using DES as
their password storage algorithm, but recently many Linux flavors tend
to use MD5 hashes instead, which are more secure to brute force attacks.

What I'm wondering is how long can a Linux password be?  Can it use
extended characters (like Windows Alt-# feature) in it's passwords and
if so, how do you use them (aka if they aren't on the keyboard)?

Additionally I have heard that an MD5 hash has no limit to the amount it
can hash (iow an unlimited length password) but somewhere in the Linux
authentication it is set to a length of 256.  What imposes this length
of password?

Lastly, in communicating with a Windows XP/2000 box using SAMBA and
Windows File sharing, how does one determine whether the password being
sent across the network is encrypted and not plain text?

Any information you can provide (and references to back it up) would be
very helpful; thank you.

Roman
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