Replication from EC2 Master to RDS Slave - Connecting to master
Since you control my.cnf on EC2, you have two options, neither of which require restarting mysql
OPTION #1 : Change old_password Protocol for EC2

Stop replication to the RDS Slave
As root@localhost run this on EC2 : SET GLOBAL old_passwords = 0;
Start replication to the RDS Slave

OPTION #2 : Lower the Security for EC2

Stop replication to the RDS Slave
As root@localhost run this : SET GLOBAL secure_auth = OFF;
Start replication to the RDS Slave

For more information, please read the old_passwords and secure_auth MySQL Documentation.
Give it a Try !!!
UPDATE 2017-07-20 16:32 EDT
Neither of these methods work for MySQL 5.7 as both options are deprecated.