I have user table in SQL Server 2008 r2. Nothing there is encrypted yet but I would like to at the least encrypt the passwords until the app is ready that will handle this b
Note: password hashing is not meant for 2-way encryption (where a rogue dba can decrypt it). It is meant for hashing it in a way that allows validation without trivially showing the password to anyone. A low or even moderate level of collisions is in some ways desirable so that it allows the password through (and unfortunately other variants) but with collisions you can never tell what the real password actually was.
INSERT INTO (..., passwd) values (...., HashBytes('SHA1', @password))
When validating passwords, you take the hash of the password
SELECT HashBytes('SHA1', @password);
And compare it against the input.