At the time, computers were not something everyone used in their daily lives. They were something that was shared. In that context, an administrator denying users of the computer access to pretty important functionality (imagine you couldn't run a debugger on your laptop, or couldn't get root) is anti-user behaviour. Passwords were (at the time) a way to restrict users from being able to access the machine without the administrators permission (since an administrator could remove your login entry -- even if you were physically present at the computer you couldn't do anything).

RMS has said multiple times that technology doesn't change our values, because our values are far too ingrained in order to be changed as something as trivial technology. But different technologies change the outcomes that we judge using our values. The proliferation of the internet and data sharing changes whether or not passwords are a good thing (since they are now used to protect user data from other people, rather than block users from accessing a system they should have the rights to access).