[edit: No in-game match-making, as far as I can tell.]
I really like it. Clearly designed around only letting people you know come into your town, which I prefer, especially in a game that a lot of kids will be playing. (and in a game where, you know, people can come i and pretty much destroy your town.)
I'd find the password system annoying if you had to enter a password everytime you visited, but you don't....in fact, you don't even have to enter a password at all if you meet up with the person whom you want to be on your friends list in person.