Are you referring to a firmware password (one that appears before you can use any startup shortcuts)?
A normal login password should not cause the install to fail, but a firmware password could cause issues.
I would disable the firmware password (you may need to do this from a 10.5 install disk). Search for 'Firmware password utility OS 10.5' for instructions.
PS you cannot repair a startup disk properly when you are running from that OS. You must boot from an install disk and use that to repair a startup disk.
One more option is to backup the disk (superduper!, CarbonCopyCloner or Disk Utility will do this). Then erase the internal disk & install a fresh copy of 10.6. Migration assistant will move back user data & applications if you run it and connect the backup disk. Personally I think it's safest to clean install major versions.
Thanks so much for the response. This clarifies things. The password is simply my basic login and I didn't really think it was a problem. Stranger things....I've seen. It all leads me to doing exactly what you recommend.
One question; I have since discovered that my computer is 32 bit. I am given to understand that snow leopard is primarily for 64 bit machines. Is this an issue that you are aware of.
The Macbook 2,1 looks like it is 64 bit (according to mactracker.ca). I believe 32bit machines will also run 10.6 anyway, since it was around the time Apple was transitioning to 64bit machines. It will simply run the kernel in 32bit mode if the Mac cannot run in 64bit mode. Most apps should also be fine too, but obviously newer ones won't be available.
You should be fine up to 10.7.x if you really want to get a newer OS, but 10.6.8 is still really nice