Obfuscation is not security.
The XOR mechanism you describe is a recipe for future pain and embarrassment. You should probably avoid it and use the built-in features of the .NET and Windows platforms to implement security.
The problem with approaches to security like the one you describe is that most attacks on systems happen from within an organization. The fact that you feel your application needs a password mechanism at all implies that security is a relevant consideration. If security is indeed relevent, why opt for the illusion of security - spend a little more effort and get the real thing.
Here are some reasons to go the full nine yards:
Techniques to break XOR "encryption" schemes like the one you describe abound on the internet, and it requires very little knowledge and access to break such a scheme.
If successful, your application may grow to have more users than you might first imagine - don't trust that all of these users will be friendly and play by the rules.
Once in production, changes to an existing system are hard to justify and harder to make than before the code is released. It's also easier to add missing functionality than to change existing functionality.
Trust is hard (or impossible) t regain. The price of a security breach is often disproportional to the price of implementing security. Once trust is lost in a system's security or ability to protect user identity/information, it doesn't matter how good the application features are, people will lose confidence in the system as a whole.