I think that the #PSWD have been removed and have been replaced by the "sed" line.
The password for your new user is set when the "sed" line is executed but only applied when the router will reboot. The shadow.custom file will be stored in nvram and loaded when the router will reboot. The password will be the same that the root. To change the user password, follow the direction at the bottom of the page :
To set a password for the user, use the Tomato web GUI and change the password field to the desired password, click "save", run the above set of commands, then change the GUI password field back to the original value, and click "save" again.
This will change the root password and when you execute the "sed" line again, the user password will be replaced by the new (root) password. You will have to reboot and change the root password again in the GUI. At this point, you have your new user with a password different form the root.
Note that when you execute the line below for the first time, the router has not been rebooted and your new user have no password. This is why it says that you have to press return for the password prompt.
ssh $UNAM@localhost "mkdir /home/$UNAM;touch /home/$UNAM/.profile && echo success"
## press return for the password prompt, you should see the word "success" reported