Passwordless ssh requires public keys be installed on the server it is the most secure method for using ssh. Passwordless means no passoword will work so unless the user signing in has the private key to match the public key installed they will be denied.
This is different than passwords for the user, which is a linux thing.
I suggest you read up on linux and ssh. The passwordless ssh is required by HDFS and so cannot be ignored. As to security I suggest you get a firewall or setup you machine to not allow connections from outside except for 7070, 9000, and 22 (ssh). Then the HDFS and other localhost connections will only be allowed from localhost to localhost.
If you want a turnkey system try the AWS AMI, which is all preconfigured with PIO and the UR with the AWS firewall so you can set secutiry groups easily to allow only the above ports to be connected to from the outside. See instructions here:
http://actionml.com/docs/awssetupguide