Hello,
There is a module available which helps you to bulk transfer details into DNN, including passwords etc. You can find the details here:
BulkUser Import and Export
It supports XML and CSV formats.
I don't know how this will affect your own password encryption. - If you can get the details out into a XML / CSV file with the password not encrypted and then import the details in using the module you should be able to get around the problem.
If you are looking for further info on DNN Membership, there is a DNN Membership document within the docs that come with DotNetNuke.
I hope this gives you some starting points.
I have personally not transferred this data across yet and I'm sure sooner or later I will come across a client who wishes to transfer their current app to DNN along with all of their users and details, so I will be interested to hear how you progress. - Will you let us know how you get on and the solution that you used / problems you came across?
Thanks,