Ok so here is my problem. Let's say I'm in shell 1 and i have open /boot/grub/grub.conf and in shell 2 i have a command ran like this
grub-m5-crypt
then i enter in my password and it spits this out at me
laskdjhfKHFIU98&y8KDJHF6576*&(*&)(*KJHB#Gy22(*#*Yiho0234hj..nih23i4h
(exageration)

Now back in shell 1 i inserted the following line password --md5 (i need super long hashed password here)

How do i go about copying the output from shell 2 and making it so i can paste in shell 1.

I know that if i open up the GUI i can just open up terminal and copy and paste that way. I do not want to use the GUI. I used it at first to get comfortable, i feel like I'm almost there now. Thanks for the help guys. Ohh yea I'm using CentOS 6.2 as well.

Install gpm, when it runs you can mark text with the mouse and paste it everywhere with a middle mouse click.

i do not have a mouse in my shell...

You will when you have installed gpm. gpm is something like a mouse driver for the console.

You could also use a temporary file. e.g.
echo "$(grub-md5-crypt)" > temp.txt
and then read in the contents of temp.txt from the editor you are using for the /boot/grub/grub.conf

i don't understand how that would get the super long password into the grub.conf file that i have open in a text editor though? it would copy it to a temp .txt document. How does it get from the temp.txt doc to the grub.conf file that i have open?

If you use 'nano' look at Ctrl-R. If you use 'vim' look at :r.

if you use graphic shaell like xterm kterm etc you have clipboard by default(sometimes ctrl+cvx don't work, use shift/crtl+ins/del)
if you use 'bare' shell with no X11 you need a way around like shared file etc.. or package 'console' that have a lot of good stuff buildin (like resume shell session from anywhere,forks,spoons etc..)
my little stuff include things like whattty=$(tty);echo 'All your bases belong to us\n Borg' >> $whattty;