Actually I have been using that because the bot uses it to identify to nickserv, it does not issue a password to the server on a server which has a passworded allow block.
Ok when I changed the password from it's nickserv password to the server password it connects fine so you are right.
However it would appear that this method is also used for the bot identifying to nickserv, as when the password is changed it fails to identify to nickserv.
So this would appear to me that it's nickserv password and the server password have to be the same.