Not that other means of accessing the passwords aren't worth considering, but in the real world, it takes a lot more for someone to actually coerce your password from you than to use unencrypted storage.
I generally like xkcd, but this is a harmful trivialization of the value of encryption. In the real world, anything that isn't encrypted is negligent as hell. There's no valid reason not to do it, with maybe the exception of a thumb drive you're sharing across a computers you don't control and are clearly aware is not secure.
I can understand extreme cases, like some sort of disputed IP where their contact to sell the content turns out not to be with the actual rights holder, resulting in no longer serving the content (with an unconditional full refund). But past that they should be legally required to host the content until the heat death of the universe.
They could have not given you root access and forced you to install your own OS for it to manage things that aren't on Steam. They could have locked the bootloader and refused to install anything they didn't sign.
Neither would violate the license provided they made the source available.
It means the core OS is isolated from all the functionality in a way that allows you to modularly add all the functionality on top of it in a reproducible, robust way.
In theory. I haven't actually dug into any of them personally.