Already found a bug.
Try this instead.

DISCLAIMER: USE AT YOUR OWN RISK.

=======================CUT HERE==================
for i in `cat list.of.users` 
do
PASSWORD=`pwgen 8`
do useradd $i -p $PASSWORD
echo $i $PASSWORD >> USER.AND.PASSWORD.LIST
done
=======================CUT HERE==================

Jean Francois - JLF Sends...
President & CEO - MagusNet, Inc., MagusNet.com, MagusNet.Gilbert.AZ.US
Director Of Managed Services - OpNIX,Inc., www.opnix.com
OpNIX - Simply Better Bandwidth