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I'm wondering why you used such an old release? Do you have some reason to use 11.2.1 instead of the latest and greatest 11.2.2?
Anyway, as far as your question goes, you should not be using that special internal user (actually the instance administrator user with all privileges) for any application level stuff. You should always create one or more internal users, with an assigned password, for application level usage. It is a high security risk to use the instance admin user for anything other than administrative tasks (it's like having all your Oracle DB apps connect as SYS AS SYSDBA!).
It is not possible to assign a password to the instance admin user as it is an externally authenticated user (see IDENTIFIED EXTERNALLY in the CREATE USER statement). Thsi kind of user is not allowed access via client/server as that would be a security risk. Only regular (internal) users can have passwords and be used over a client.server connection.
No specific reason to use the older version. It is just a temperory test environment.
Thanks for your inputs. I was just trying to work around recreating my timesten and underlying oracle database user.