Radius + PostgreSQL + MD5 Passwords

[Phillip Smith]

Well I've spent the better part of the last 9 hours trying to figure
this out, but I can't seem to get it....

What I am trying to do:
Central FreeRADIUS server with PostgreSQL database for remote
ChilliSpot appliances to auth against.

My problem:
I'm strongly against storing passwords in clear text so I want the
passwords in PostgreSQL to be MD5 or SHA1 hashed.

Everything I've read through Google seems to be indicating that for
any form of encryption to work between the client and server, that the
database has to use clear text passwords.

I have successfully got the FreeRADIUS + PostgreSQL combination
working with clear text, but I can not make the move to hashed
passwords.

1) It what I am trying to do possible?
2) If so, is it possible without any significant drawbacks?
3) Any pointers in the right direction to how to achieve what I am after?

Cheers,
~p