I don't see anything obviously wrong, and I did try creating a new input. I've got some simple repro steps:
Import NGUI into a fresh project and open scene "Tutorial 9 - Input".
Select UI Root (2D)/Camera/Anchor/Panel/Input/UISlicedSprite and check the "Is Password" box on the UIInput component.
Press Play, click in the "You can type here" input, and hold down the period key until the password field overflows.
With this specific case, the stars will flow out the right side of the box for a little while, but eventually it snaps the carat to the right side of the box and the stars overflow the left end of the box. At this point it does seem to be limiting the number of characters it's showing, but there are still too many. When I hit return to finish the input, it looks like it shows all characters without limiting the length at all.
Another case in this same scene: select the UILabel with the big, multi-paragraph chunk of text. Remove the first newline so that first line of text gets wrapped. Check the password box on the label. When I do this I see it limit the label to one line, but it still exceeds the line width.