I'm pretty sure as long as the information a prospective employer is asking for isn't covered under anti-discrimination laws, they can ask pretty much anything they want, and social networking passwords or even your own personal diary aren't covered by those laws. The important thing, however, is that you don't have to provide any information that you don't want to.
I don't really see the big deal with this issue. Yes, I think it's stupid of an employer to ask for permission to have full access to your non-work, personal life, but would you really want to work for a person or company that would even ask for that? It's not an invasion of privacy if they ask and you give it to them.
It's a dumb thing for employers to ask and I don't see it catching on. I'm positive many employers have asked far more ridiculous questions in the past, but we never heard about it because it wasn't "newsworthy".
