"Disable Clear Text Passwords" Breaks Randomly

Typically, when you set up a Mac client to bind to a Mac server using Directory Access, there is one lone entry in the Security settings that is checked by default, and that is the "Disable clear text passwords" setting. This seems like a prudent default, and I always leave it checked. I assume that this means that passwords are then sent to the authentication server in some sort of hashed or encrypted form, and that both server and client are set up to negotiate this transaction properly out of the box. Indeed, most of the time this does not present any sort of problem whatsoever.

But for some reason, every now and then, completely randomly, Mac clients will suddenly and mysteriously be unable to authenticate to my Master Authentication Server. Seriously, nothing's changed. Just all of a sudden, Macs can't authenticate. The solution? Un-tick that "Disable clear text passwords" box under the LDAPv3 server configuration's Security tab. Next thing you know, everything's right as rain.

Directory Access: LDAPv3->Select Configuration->Edit
How in Hell Does this Break?

(click image for larger view)

Seriously, can anyone tell me what I'm doing wrong? 'Cause frankly, it's annoying.