This cannot be done, not even in the latest Cisco FWSM 4.1.8 image. "Maybe" there's a hidden Cisco command to achieve this, which I'm not aware off.
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Please do check to have service password-encryption enabled in your device.
As far as i know for snmp you are not giving any key.... you give only the string which will not get encrypted. If you have enabled the service password-encryption in your device. Then your tacacs key will get encrypted to level 7 encrption automatically. Else it will take 0 by default with plain text. But this also even it will not do md5 encryption for those password.
Please do rate if the given information helps.
That does not work on Firewalls ASA or FWSM
I am also running currently with 4.1(8) version ... Can anyone tell me if the later versions resolve this issue?