One of the updates in the Magento 1.6 version was to change the forgot password email. While in previous versions, the temporary password was sent in the email, the latest version uses a reset link instead. If you have a custom template for the forgot password email, and that was not updated, you might end up with the password sent set to blank. This is obviously not acceptable. One solution is to create a new template incorporating the reset password link.
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Go to System > Transactional Mails
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Load default template: Remind Password