Google Apps for Business is supposed to be secure enough for corporate data, as described in their FAQ: http://www.google.com/apps/intl/en/business/faq.html
They say "We also undergo regular security reviews by third parties and SAS 70 audits by an independent third party. We fully believe in the security of our Google Apps environment that we store our own Google corporate data in the same environment."
Therefore, it should be safe to use Google Spreadsheets (Business) to keep track of passwords, right?
Best Answer
If you have doubts about it, then that's usually a pretty good "red flag" in my opinion.
The issue is that you are depending on a third party to store your security-related information. It just takes one bad employee (at your company as well as at a third-party company) to breach the trust and cause a lot of problems for you, and this is why encryption is so popular.
Although I have a great deal of confidence in Google's abilities to run their systems securely, and to select trustworthy employees, I still wouldn't store my passwords on their system unless I encrypted them on my own system before-hand (that way, they'd only get the encrypted version of the information).
Also consider the possibility of a third-party obtaining a court order for Google to provide full access to their customers' data. The nature of this court order could be that such access be kept secret from the customers as well. In this case I imagine that Google would have no choice but to comply with the law, and in the end you wouldn't really know who actually has access to your data.
My recommendation: Don't depend on third parties to store sensitive information if you don't have to (and if you have to, then only let them store encrypted versions of your data).