Well, his reasoning is because he says it takes up CPU cycles, that it runs in the backround. That is his reasoning, and obviously there would not necessarily be a good reason to turn it off if this were not true. I do know that this encrypts passwords with a weak encryption, and it is easily cracked (I know I can crack it). The secret is always encrypted one way no matter what---if someone were to break into a router and see encrypted passwords, the fact that the person was able to bypass the secret password tells me that person could easily crack the passwords encrypted by "service password-encryption", and therefore it basically serves no purpose---if it does indeed take up CPU cycles, then turn it off.
Burt