While identity theft is a real problem, there is abundant evidence that it comes from institutional sources: from hackers breaking in to corporate databases or from gross security leaks on a mass scale. I have seen no evidence whatsoever that individuals are stealing passwords by over-the-shoulder spying.
This reminded me of a project we worked on a few years ago where we dropped concealing the password field. As a benefit, we were also able to remove the password confirmation field because it was now redundant information someone could see with their own eyes.