There's an ENCRYPT_METHOD specification in /etc/login.defs which may let you use the old passwords as is. I've never tried playing with this though, so approach with caution, and probably a good idea to leave root logged onto a console while you check you can get back in.
Unless you've got hundreds of users that make it impractical, or some other technical reason you can't change the passwords then in your situation I'd be inclined to re-issue everyone with passwords. Running with a non-default password hash is the sort of thing that might pop up and bite you some time in the future when the knowledge that you'd changed it from the default has long since been forgotten.