When used by PAM to check passwords, a 6 character password being changed to a 20 character password gives a "too similar" error because of the number of similar letters. THere should be an option to have the similarity 'score' reduced based on the length of the new password. eg: password -> swordfish ... new password is "too similar" ... but not very long either. password -> aswordfishatemyboat ... still too similar?
When md5 passwords are not being used, the effective password length is 8. The words "swordfis" and "aswordfi" are indeed similar.