Yes, most 5.0 binaries have support for SSL secured and/or authenticated connections between the client and server. We can't currently build with the new YaSSL library everywhere, as it's still quite new and does not compile on all platforms yet. See http://dev.mysql.com/doc/mysql/en/secure-connections.html

You could also tunnel the connection via SSH, for instance if the client application doesn't support SSL connections. For an example of this, see http://dev.mysql.com/doc/mysql/en/windows-and-ssh.html