Password compromised whether or not FileVault was used?

Per the first sentence, this impacts users who either use Legacy FileVault or have home folders mounted via NFS, AFP, or SMB. If you don't fall in either category, no issue.

Per the second sentence, the logs these plain-text passwords are stored in may have been copied to backups (not Time Machine) or to syslog servers.

Link to TS4272 to save readers the trouble of finding it.

http://support.apple.com/kb/TS4272

Recommended reading:

About the security content of OS X Lion v10.7.4 and Security Update 2012-002

* the first item describes the Login Window issue, with reference to CVE-2012-0652.

From Apple's document — and from seeing the symptom of the bug on (just one) computer where FileVault 1 was used — my understanding is that:

* simply making an AFP connection from a 10.7.3 client, to a server, does not cause the password to be saved in pain text

* the issue may affect a 10.7.3 client that uses a server for both (a) login window authentication and (b) automatic mounting of the client's home directory.

Hint: at a 10.7.3 client, in the Users & Groups pane of System Preferences, click Login Options. If any network account server is listed, then you may find that the password of a network account user is saved in plain text at that client computer.