One key thing about the YC school of web app design is to make it as easy and quick as possible to try the product. By the time I get an email from you with my password, I will have lost interest.

I would strongly recommend you get a demo that doesn't require a signup -- or, a signup that is instant and does not require email confirmation.

I second this one. I'm tired of signing up anywhere.

My recommendation is to ask a new user for a user ID only, so they can contribute content right away. Store a cookie based off of that ID.

Then display a "set password" or "become member" link which prompts the user to preserve their temporary identity with a password.