High,
to dig deeper into the topic you need to tell on wich Progress/OpenEdge version you are running.
When you supply the username and password in Progress paramter file or on the command line or in a Windows shortcut you can't supply it in an encrypted form. Therefore I don't think it is a good idea to provide such sensitive information in that way.
I know that almost all of the application do the database connect from the parameter file supplied to the Progress executable. I don't think that is really a good idea: For one if the connect fails, your Progress/OpenEdge session will stop and you have no chance to handle a connection exception - an ugly Progress error message will pop up to the user. Secondly, you have no real choice for the authentification technique when the blank userid access to the database is disabled.
Therefore I prefer to do the connect with the CONNECT statement in the ABL session. This way you have much more freedom on handling exceptions and authenticate the Progress/OpenEdge sessions against connected databases. Be it the use of the Progress User table or the client principal object which is availbel for 10.0B+ (if I remember correctly).
HTH, RealHeavyDude.