Is asking for a password a deterrent to signing up for emails?

I've got a client who uses one of the mailing list services for their email blasts. They are an ecommerce site and they want to get as many people signed up for their email specials as possible, of course.

They are fighting amongst themselves which of these two situations is better:

1) link takes the user to the mailing list service where the user fills out first name, last name, state, and optionally makes choices (checkboxes) of what they want to see.

2) link takes them to an account signup page within their site where the user fills out first name, last name, password, state, and optionally makes choices (checkboxes) of what they want to see.

Note - the only difference between making it internal/external is an additional field for password.

#2 creates a user account on their site, and reaches out to the mailing list provider to sign them up with their optional settings.

Note that in #1, the user will not have an easy way to modify the products/services they wish to receive emails about, unless they go out to the mailing list service and do it. In #2, they will be able to continue to maintain those settings through their account on the website.

There is a side arguing that asking the user for a password is too invasive and will stop some people from signing up.

Does anyone have any actual data on this, or real life experience to say how much signups would decrease simply by requiring a password as one of the few fields they need to fill out?