You're using a two-character salt, different for every user, which is viewable as part of the hash. I'm suggesting pretty much the same thing, except the user name is the unique part of the salt and the process is more obfuscated. What am I missing here? Did you think I wasn't going to MD5 or SHA-1 the result? Heh.
Incidently, I fail to see how any security method is going to save you if the person with root gets pissed off. He can social engineer people; he can redirect himself a copy of their user names and passwords on login; he can scan data streams and memory; etc. All he needs is a few logins to make your entire database unsafe, unless you know exactly which ones he has. Face it, you're screwed. The only thing you can prevent is him knowing everyone's password in one easy step, but why would that matter when he has root? He controls everything.
EDIT: I suppose if you know who logged in when and also when it was he inserted the redirect, you could identify which users he had the login info for and reset just their passwords. To prevent this, he'd also have to edit the logs before every site backup, which I admit would add a level of complexity to things. Still, anyone with half a brain would most likely have no trouble doing this.
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