The reason I ask is because I now have them capped at 20 and can't complete a duty mission until I make some room. So what can I do with them? My only option is to dismiss them but I have a feeling like I should be able to drop them off somewhere... or sell them to Orion slavers? Whichever.
Passengers are generally Colonists (other civilians like bartenders, chefs, advisors, diplomats, and refugees are part of your regular roster). Colonists are mainly used in Colony chain missions, or have a relocate (for fed) or deport (for KDF) to the borders DOFF mission that requires 5 provisions commodities, 1 medical supplies commodity, and 5 colonists. That mission gives a 500 dilithium reward, and is available in sector space or from the Ops officer.
Alternately, you could just sell your spare Colonists on the exchange if you really need the room. I'm told they go reasonably well; folks looking to complete multiple colonial chains at once may need more colonists than they can recruit through normal DOFF job channels.
I have never seen a passenger that was not a colonist. Other civilians are considered as separate types.
I wouldn't use the colonists for sale.
That said, they can be obtained fairly easily by rerunning the 'get colonist' mission (name escapes me, but requires three officers and has success traits for counselors and quartermasters), so if you're strapped for cash and sell a few it's not that big of a loss.
Colonists are a VERY valuable resource to get better BOffs with by doing the "colony chain" missions in each exploration cluster. With it you can get a lot of otherwise very expensive DOffs, and can do it multiple times.
There are also a few other assignments you can use colonists for. Colonists can very occasionally be used in "real" assignments (I believe you can send them to get prototype plans, for instance) and occasionally have useful traits for that. They can also be used on missions that would generally "eat" a civilian, such as the "support colonization" missions in Beta Ursae and Alpha Trianguli, and if you're really unscrupulous and a KDF, you can sell them into slavery to the Orions, for example.
In short, colonists are about the most expendable and easily-spent of DOff types. Don't get too attached to them, but they're very useful.