Found a fix for the ftp password prompt issue…Credit goes to ufgcorp on the MT forums.
1. open wp-config.php
2. Add the following and edit with your ftp info
// ** FTP SETTINGS FOR AUTO-UPDATE ** //
define(‘FTP_HOST’, ‘localhost’);
define(‘FTP_USER’, ‘YOUR-FTP-USERNAME’);
define(‘FTP_PASS’, ‘YOUR-FTP-PASSWORD’);