I've done this before, and it is pretty neat. The problem with stenography is the fact that most is completely security through obscurity.
Might I make a suggestion for a better stenographic algorithm?
Use RSA to determine where each bit should be placed. This requires keeping track of where former bits have been placed, but makes the displacement of bits seem almost completely random (In normal stenographic images, there are noticeable lines). To use an RSA like password, I would take the text password, and then use BlumbBlumbShub on it until I had a couple of prime numbers sufficiently large enough for your security purposes.
Thus, without the correct password, the data is very hard to retrieve. It adds the benefit of a strong crypto algorithm on top of the obscurity of stenography in the first place.
BTW, Stenography works best with not digital photos. People expect digital photos to be smooth. They do not, however, expect a real life photo to be smooth, thus they interpret the extra bits as grain instead of useful data.
Yakman, if you like, I could post some RSA / BlumbBlumbShub code that I have.
(Yes, I've played with stenography, it is fun to dink around with
)