This will have two side effects.
First the least likely; this makes your password susceptible to key loggers. They typically don't monitor your clip-board for cut and pastes. Not that I have stopped typing in passwords manually because of this. I find it easier to not type them in, and I find it more secure to store my many, many passwords in a key-encrypted file.
Second, this also encourages users to use shorter passwords. My passwords are typically 128-bit randomly generated (assuming the site will let me enter in a password that long). Try typing that in by hand. I'm uber-glad that all the financial information I have stored in eBay is years outdated. Instead I had to rely on a 40-bit generated password that was still a pain in the ass to have to type in by hand.
Either way, I'd discourage anyone from using their service until they change this policy. Not that anyone will. Except me. Insecure is insecure, and Erin just got her credit card stolen from using it on insecure sites that promised to be secure.
I was forced to buy something off eBay because I couldn't find another source for it. I will try harder next time to not have to use it. Oh best part is there's no one to contact at eBay to explain this to them. Not that they'd listen.