I am sorry but if they told me they wanted me to plain text my database password I would say "nope". Now I have heard on cPanel servers running phpMyAdmin use that file to install and uninstall Site Software, which I sorta understand, still think it can be done better. I have never placed my DB password in the .my.cnf thats just asking for a simple LFI attack.
In my opinion it is not safe, even with the permissions set to 600.
chmod 600 .my.cnf
Edit: I thought about this more and I can see that this might be an acceptable method you want to invoke a client from a script that runs noninteractively, there is no opportunity to enter the password from the keyboard. On some systems, the first line of the script is read and interpreted (incorrectly) as your password.
But defiantly keep that file set on 600. regardless, I still feel its bad practice.