Did i just find by accident the best encryption algoritm you can write?
@Avaro or Vortez: also Block Cipher Chaining is also something very similar.
If you are really that interested, I can ask my Cryptology professor (I hope that's the word in english and not some strange religion) how breakable your algorithm is, but I would guess that it is pretty bad even compared to RSA. (Today, nobody would be using RSA encryption, there are just too many problems with it. But it is widely used, so until somebody comes up with the death strike for RSA. That happens as soon as the quantum computers can factorize bigger numbers).
Let's examine quickly where your cryptographic power lies: You generate a hash from your password. No power is hidden here, it is the same as if you would use a random 32 bit value.
Then you create a pseudo random number with the Mersenne Twister. After that you make an XOR operation with the pseudo random number. So your whole power lies in the strenght of Mersenne Twister. I don't now much about it, but it isn't used in cryptography because the next pseudo number can easily be guessed when you have some.
Plus as the link suggests, when you reuse a password, you are pretty much done, which isn't a very useful cipher in the modern age.
There is a reason why you tend to have a bachelor in mathematics before you specialize in Cryptography. While it can happen that you find the next super cipher, the chances that you do are very slim.
There are a LOT of ciphers out there that can fit your need, RSA, modern DES algos, even modified Vignere Ciphers may be more secure. For a Programmer, there is absolutely NO reason to not use a standard cipher. They have been very well researched and are VERY secure ("the hidden world" may know how to break it, but that is always a chance for people like us).