how would ssh know that you are sending a password?
do you _really_ want your transport layer to start guessing at what strings may be password prompts that should shift you into line-based mode instead of character mode? what if that string shows up in the middle of an image while you are playing a game, do you really want it to start buffering all your keystrokes (and not showing you) until you hit enter?
the only fix for this is to waste bandwidth by sending garbage packets.
my solution, try to sidestep the problem by using hardware token based authentication wherever possible rather then passwords (even over encrypted links)