It's not too easy to create a reliable and at the same time memorable password.
So, how about a number of memorable questions instead of a single password? (This idea is related to this one)
Let the user create the questions himself. It could be any string, even a random number of symbols, as long as it reminds him of something. It will make signup much longer, yes.
UPD: When a user signs in, he sees the question he is currently answering, so questions work like password hints. Just to clarify.
Answers are stored hashed (with salt fo course) (will additional encryption be useful?). Questions are stored encrypted in a chain, except for the first one - answer for the first question is the key to decrypt the next one, and so on. That guarantees that a potential violator will have to get the answer for each question one by one in a strict sequence, which will make it more difficult to do with social engineering.
Reset in case of forgotten answer for one of the questions: the forgotten part of the chain is deleted, and user is allowed to "grow" a new one instead of it. Of course, we first ask the user if he really wants to do that via email.
Reset in case of compromised answers: the whole chain is deleted, and user is allowed to create a new one. Again, email confirmation.
(this idea relies on email, could be an issue)
Could it be better than standard password auth?