Hi Thomas,
Sorry, just looking through some questions that have been sitting unanswered for a while and came across this...
The problem I see would be that a plain text file could be reached and would be displayed by a browser. Whilst an incorrectly formatted PHP file usually breaks the page, it does give immediate indication that something isn't right and therefore login details 'probably' wouldn't show...
I wouldn't generally recommend storing plain passwords in a text file like this and would never use it on a production server. I think the best option would be to use the Db authentication in most instances where at least the passwords are hashed and provide some security...
John