If it matches, the password is compromised. However, this is simply offline attacking. However, the easier of the two is getting the password. NT LM 0.12 uses MD4 to generate keying material, and since upper and lower case are allowed, the full 56 bits allowed by DES can be used. However this does nothing towards a realtime attack.
Client starts a session.
Attacker sees this session, and waits for the response from the server. Server sends the response and the Attacker grabs it. Client receives the Attacker's packet, and now assumes a plaintext password should be used. Client receives the real packet from the server, but ignores it thinking it is a dupe. Client sends the password in plaintext.