As I recall, most wifi passwords on computers can be viewed in plain text. I can go onto either my Windows 7 or Ubuntu 12.04 PC at home, pull up the wifi connections app, view connections, and click a box for it to display the password if I want.
I believe this is true for the Kindle wifi connections app too, when you're either creating or editing a connection.
I realize you're talking about reading the raw password file independent of the wifi connections app, but it would be just as easy for somebody to pull up the wifi connections app.
I think the idea of security is letting nobody get onto your computer/ebook reader/ipod/whatever in the first place.