Cameron,
The basic connect() method accepts only a clear text (non-encrpyted, non-encoded) password. However, it is possible to have your client connect to the IS server using a secure connection.
Hava a look at the IS Server API docs for the Context and BaseContext classes. You can use the BaseContext.setAuthentication(), BaseContext.setSecure() and BaseContext.setSSLCertificates() to configure a Context that will connect to the IS server using an HTTPS connection with login credentials and SSL certificates that you specify.
HTH,
Mark
#webMethods#webmethods-Protocol-and-Transport#Integration-Server-and-ESB