ok well this is pretty much a different version of yours with a few add-ons

dialog password_game {
  Title "password game"
  size 400 350 80 120
  option dbu
  button "send the password",1, 11 80 55 15
  button "set password",2, 18 2 40 15 
  button "set message",3, 18 41 40 15
  button "send to random person",4, 9 100 60 15
  box "The password is set as",5, 9 19 60 20
  box "the message is set as",6, 10 59 60 20 
}
on *:DIALOG:password_game:sclick:1:{
  notice $1 $?="Enter who you wouls like to send the password to" 4 %message 1 the password is 9 %password 1 to recieve your prize just go to the channel and say 9%password
}  
on *:DIALOG:password_game:sclick:2:{
  set %password $$?="Enter a new password to be sent to a lucky person" | .scon -at1 newpassword |
} 
on *:DIALOG:password_game:sclick:3:{
  set %message $$?="please enter a messsage to be sent with the password" | .scon -at1 newmessage |
} 
on *:DIALOG:password_game:sclick:4:{
   var %nick = $nick(#,$r(1,$nick(#,0))) | msg %nick 4 %message 1 the password is 9 %password 1 to recieve your prize just go to the channel and say %password
}  

alias newpassword {  
  %password   
  code %password 
} 
alias newmessage {  
  %message   
  code %message 
} 
alias PG {
  dialog -m password_game password_game
}
menu status,channel {
  password_game:/PG
} 

there are a few things wrong with it (before anyone says "FAIL!!") i can't get it to send it to a ramdom person it just sends it back to me. i don't know hw to get the password and message to appear in the text box. i don't have alot of experiance with dialog snippets. and well the main thing of this since it is a game i can't get it to say something when you say the password. i don't know how to set that up is it sopposed to be like this?

on *:text:%password:*:{ /notice $nick you have won a beer
}

First I'm picky.. get rid of the /'s in the code.. makes it look messy..

Anyways, in your introduction you said:

on next UPDATE i hope to add another button that picks a random person and sends it to them

Use this to choose a random nick in a chan.

var %nick = $nick(#,$r(1,$nick(#,0)))

Now.. this doesn't work exactly the same as you may think it does(it doesn't show a window upon action to the user being noticed in $1)

/notice $1 $?="Enter who you wouls like to send the password to"

$$?="text" and $?="text" is used for windows via the mIRC running the identifiers. It doesn't let other mIRC client's run off the identifier.

The new code will look like this with the random nick part added.

dialog password_game {
  Title "password game"
  size 1 1 80 60
  option dbu
  button "send the password",1, 11 40 55 15
  button "set password",2, 18 2 40 15 
  button "set message",3, 18 21 40 15
}
on *:DIALOG:password_game:sclick:1:{
   var %nick = $nick(#,$r(1,$nick(#,0))) | msg %nick 4 %message 1 the password is 9 %password 1 to recieve your prize just go to the channel and say %password
}  
on *:DIALOG:password_game:sclick:2:{
  set %password $$?="Enter a new password to be sent to a lucky person" | .scon -at1 newpassword |
} 
on *:DIALOG:password_game:sclick:3:{
  set %message $$?="please enter a messsage to be sent with the password" | .scon -at1 newmessage |
} 
alias newpassword {  
  %password   
  code %password 
} 
alias newmessage {  
  %message   
  code %message 
} 
alias PG {
  dialog -m password_game password_game
}
menu status,channel {
  password_game:/PG
} 

That should work, if you have any questions. Feel free to ask.

2/10 for now.