There is a hadouken bit, as seen on page 4, but players normally don't know about it.
Now, as for how to actually create a password based on those 36 bits: First eor bits 28-31 into each of the first 6 nibbles. Then, digit n of the password is defined by concatenating the bits specified by the mask in the nth column of the following table:
0x20,1, 0x80, 0, 4, 0, 2, 0, 8, 0x10,0x40, 0,
1, 0, 0x10, 4, 0, 0x20, 0, 8, 2, 0, 0x80,0x40,
0, 8, 0, 0x10, 1, 0x40, 4, 0x20, 0, 2, 0,0x80,
0, 4, 0x20,0x80, 0, 8, 0, 0x10, 0, 0x40, 2, 1,
8, 0, 0, 0, 2, 0, 1, 0, 4, 0, 0, 0
For example, for the 2nd digit, you would concatenate bits 0, 19 and 26.
This gives an index into the nth row of the following table, which is the digit value:
7, 2, 1, 4, 8, 3, 6, 5,
6, 5, 4, 1, 7, 8, 3, 2,
7, 5, 6, 1, 4, 5, 2, 8,
1, 3, 8, 5, 7, 6, 4, 2,
2, 3, 5, 7, 4, 6, 1, 8,
8, 2, 4, 7, 1, 3, 6, 5,
4, 5, 1, 8, 7, 3, 2, 6,
4, 8, 5, 7, 1, 2, 3, 6,
3, 7, 5, 2, 1, 8, 6, 4,
2, 5, 1, 4, 8, 7, 3, 6,
8, 7, 2, 6, 4, 1, 5, 3,
4, 7, 1, 3, 8, 2, 6, 5