Basically, if you hold A or C on the password input screen, moving the cursor around will cause it to automatically input the letters the cursor moves to. In fact, it actually inputs them twice, from what I can tell. It probably shouldn't be doing this, since it makes it really hard to input passwords quickly (since I sometimes end up moving the cursor after I press C but before I've released it).
Tested in Genesis Plus GX and Kega Fusion.
Video:
Fixed