Exact the same problem here.
We had to go back to 1.6p18 (p19 not installed) so that this works again.
Editing the hosts.mk is not an option for us since we use an automated importsync at night.
What we discovered: when doing this via API, unicode is set. When doing this by hand in Webif, then unicode is not set.
Something must be different in 1.6p20, maybe this?
Password dialogs now handle passwords more securely (checkmk.com)
PS: Screenshot for refence 
BR Thomas