Everything is broken, all appears to be lost. Your developer sucks: the reset password form is a 500. Your sys admin sucks: the reset password page on the front-end is not actually sending emails.
Some folks need you, the newb administrator, to reset their password.
You try to type a raw password into the admin change page but it doesn't take. You know that it has something to do with this little help text regarding algo$salt$hash.
Let's change this password for this customer. Open up a python interpreter.
>>> import sha # deprecation warning but hey, we're in a hurry
>>> algo = 'sha1'
>>> salt = '54123' # choose your own random 5 chars
>>> hash = sha.new(salt + 'MyPassword').hexdigest()
>>> "%s$%s$%s" % (algo, salt, hash)
'sha1$54123$893cf12e134c3c215f3a76bd50d13f92404a54d3'
You can paste the contents of that string into the password field for the user and the user will then be able to login with MyPassword.