In short because the new version is way faster and lighter than the old one, and empty message in password моде is used too rarely to make the whole control heavier because of this, and even there are 2 possible workarounds. Of course you could use asp:TextBox, and you will have to do similar client logic. Yes it is considered as limitation since it was never working before Q1 2012, and there is PITS issue about it. We just think that the whole control (numeric text box, masked text box and date input) should not suffer of performance penalty to work in this insulated case that is applied for the TextBox only.
About the demo: the idea of the demos is to show the exact plain functionality, so the people to know how the controls behaves and what to expect. All custom solutions are posted in the CodeLibrary section. Focus/blur causes the empty message to be shown, and it is a bug that it is not shown from the beginning and we have fixed this, but the demos are using the official version and not hotfixes so they will stay such way until the Service Pack.
the Telerik team
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