Authentication with Dovecot
PLAIN authentication has the advantage of being supported by all clients. Certainly the disadvantage is that you have visible passwords on the wire, but that is easy to solve with SSL/TLS. This means that it is easier to set up SSL/TLS and PLAIN passwords than it is to fight the many hassles that come with other options. Here are some links that show how to use SSL/TLS.
The major drawback of storing PLAIN passwords on the box is that if you have an attacker get access to those they will own your email. The other side of this is that you are still in trouble if they have access to your box. The imperative is that setting up a mail server is not just about Postfix of Dovecot it is also about security that serves to protect your system as a whole including firewalls, policies, permissions, processes, etc.