I then wonder if these passwords are even less secure since the backend system would have mapped {A,B,C}=1 at some point for the dialer system to work. so my password "CaB" would be the same as "cab" and "CAB" and "ABC" and "111", etc.
Not necessarily. For all we know, Sabre could have scooped T9, and transmitted a "C" by sending three single pulses, or an "N" with two groups of six. (We're talking about the days of rotary phones, not touch-tone, remember.)
(This was burned into my brain years and years ago while watching a "Jeopardy!" episode, in which this mistake caused all three contestants to lose the final round.)
Because of this, most people cannot have punctuation in the password (not on phone keypad), and aB2CaCb becomes 1111111. So much for 104 keys on the keyboard.