Is it possible to use MD5 password encryption to encrypt passwords when using Postfix / SASL and MySQL? Currently, my setup is using the MySQL CRYPT() function, which for various reasons isn't ideal.
yes it is possible.
I guess you are using libpam-mysql. There is an option you can set named crypt.
you can also use auth required
Then crypt yout Passwords with MD5 in mysql.
You can find the docu in the readme und /usr/share/doc/libpam-mysql
I quote a part:
In saslauthd config file in debian you have to set,
dont know how to set it in another distribution, bur the process have to be startet like this.
But I guess you already have that.