The problem with digest authentication is that it requires the server to store a plaintext password or password-equivalent

Yes, good point as well. (I did say "at the very least" - but I should have made it clear that more advanced schemes would be much better.)

I consider the house embedded device LAN an isolated network ... Embedded devices often have really bad security anyway

Taking this point together with the above, I'm confused about the message, whether plaintext passwords are okay or not. When an embedded or proprietary device has limitations, then one might not be able to do anything about its security, sure. But anything else, personally I like to play it safe. And when it comes to recommendations to others, personally I'd very much avoid saying that plaintext passwords are okay (when they can be avoided, as in the context of this thread) - that's all I was trying to say.