Check off Encrypt password option in User login settings dialog on the Security tab in PHPRunner.

 use BeforeLogin event to put your custom login procedure there.

I recommend you to try the following.
Check off Encrypt password option in User login settings dialog on the Security tab in PHPRunner.
Then build the pages and open generated login.php file with a text editor.
Find this line there:

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$strPassword=md5($strPassword);

try to replace it with:

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$strPassword=sha1($strPassword);

or with:

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$strPassword=strtoupper(sha1($strPassword));