Works fine for me using just the same ASCII key on both routers.
Cisco 2851 running 12.4(25c):
spoke#sh ip bgp summ
BGP router identifier 2.2.2.162, local AS number 65531
BGP table version is 3, main routing table version 3
1 network entries using 117 bytes of memory
1 path entries using 52 bytes of memory
2/1 BGP path/bestpath attribute entries using 248 bytes of memory
0 BGP route-map cache entries using 0 bytes of memory
0 BGP filter-list cache entries using 0 bytes of memory
BGP using 417 total bytes of memory
BGP activity 1/0 prefixes, 1/0 paths, scan interval 60 secs
Neighbor V AS MsgRcvd MsgSent TblVer InQ OutQ Up/Down State/PfxRcd
2.2.2.41 4 65530 3 4 3 0 0 00:00:47 0
spoke#show run | s router bgp
router bgp 65531
no synchronization
bgp log-neighbor-changes
neighbor 2.2.2.41 remote-as 65530
neighbor 2.2.2.41 password 7 010703174F
neighbor 2.2.2.41 ebgp-multihop 2
no auto-summary
spoke#
spoke#sh ip bgp nei 2.2.2.41 advertised-routes
BGP table version is 3, local router ID is 2.2.2.162
Status codes: s suppressed, d damped, h history, * valid, > best, i - internal,
r RIB-failure, S Stale
Origin codes: i - IGP, e - EGP, ? - incomplete
Network Next Hop Metric LocPrf Weight Path
*> 1.1.1.0/24 0.0.0.0 0 32768 i
Total number of prefixes 1
spoke#
Just to save you the work, "010703174F" is level 7 encryption for "test", the command was entered as "neighbor 2.2.2.41 password 0 test".
x86 box running 5.2:
[admin@x86-lab-1] /routing bgp> exp
# may/25/2011 15:41:20 by RouterOS 5.2
# software id = WTPH-Z5E2
#
/routing bgp instance
set default as=65530 client-to-client-reflection=yes disabled=no ignore-as-path-len=no name=default out-filter="" redistribute-connected=no redistribute-ospf=no redistribute-other-bgp=no redistribute-rip=no redistribute-static=no router-id=0.0.0.0 routing-table=""
/routing bgp peer
add address-families=ip as-override=no default-originate=never disabled=no hold-time=3m in-filter="" instance=default multihop=yes name=peer1 nexthop-choice=default out-filter="" passive=no remote-address=2.2.2.162 remote-as=65531 remove-private-as=no route-reflect=no tcp-md5-key=test ttl=2 use-bfd=no
[admin@x86-vrrp-1] /routing bgp>
[admin@x86-vrrp-1] /routing bgp> /ip route print where bgp
Flags: X - disabled, A - active, D - dynamic, C - connect, S - static, r - rip, b - bgp, o - ospf, m - mme, B - blackhole, U - unreachable, P - prohibit
# DST-ADDRESS PREF-SRC GATEWAY DISTANCE
1 ADb 1.1.1.0/24 2.2.2.162 20
[admin@x86-lab-1] /routing bgp>
They're just peachy establishing adjacency and you can see the route it learned.
Only changes made are find/replace on the first three octets as the only quick lab routers I had available were public IPs.