If you use SQL Server Authentication (2005), are the login details sent in clear text over the wire?
The credentials are sent in clear text.
You can probably find a number of sources for this, but here's one:
"Secure the channel between the Web server and database server because credentials are passed in an unencrypted format. For example, use SSL or IPSec."
Here's a link to some security best practices for SQL 2005. That doc states in part:
In Windows Authentication mode, specific Windows user and group accounts are trusted to log in to SQL Server. Windows credentials are used in the process; that is, either NTLM or Kerberos credentials. Windows accounts use a series of encrypted messages to authenticate to SQL Server; no passwords are passed across the network during the authentication process. When SQL logins are used, SQL login passwords are passed across the network for authentication. This makes SQL logins less secure than Windows logins.
As secure as you want to make it...
you can configure SSL fairly easily, and if you don't have a trusted cert, if you force encryption, SQL Server can create/issue it's own self signed cert for your use...from this write-up
Credentials (in the login packet) that are transmitted when a client application connects to SQL Server are always encrypted. SQL Server will use a certificate from a trusted certification authority if available. If a trusted certificate is not installed, SQL Server will generate a self-signed certificate when the instance is started, and use the self-signed certificate to encrypt the credentials. This self-signed certificate helps increase security but it does not provide protection against identity spoofing by the server. If the self-signed certificate is used, and the value of the ForceEncryption option is set to Yes, all data transmitted across a network between SQL Server and the client application will be encrypted using the self-signed certificate
Apart from the fact that passwords are sent in clear text, it is also possible to replace the hash of the password.