The security assist wizard will not create pages that use Form builder forms for login and registration.
to use form builder forms, you will need to crate the login and registration pages manually. Add the form to the page, then apply the Security Assist Authenticate User behavior for login, or the Insert Record Behavior for the registration.
The random password mentioned in that post does not effect the password that the user enters, it is just a random string that is used to update the users status from the link in the email.
I have version 1.0.2 of Form Builder, so back to the original question "Do I have to use Universal Email or will other methods of sending mail work?". Unless I upgrade to version 2, of course.
Thanks for clarifying the other points. I just want to know if various other WA products are going to integrate with this but also want to be able to use some of the existing DW extensions that I have from other companies as well.