For this to work, it would need to be possible to set a Discourse password through the API. I’m fairly sure this can’t be done. The best information I can find about it is here: Is there an API for changing a password? - #2 by blake. It is suggesting to trigger the password reset email through the API.
Yes, one approach would be to write a script that loops through your users and makes the API call that’s given in the previous post I linked to. It is possible that you will run into API rate limit issues with that. Here’s another way it could be done: Reset user password by Admin - #10.