Maybe this bug should be reopened or open a new one, using Ubuntu 12.10 32 its 
with latest updates and PBIS Open 7.0.6.935 from:
http://download1.beyondtrust.com/Technical-Support/Downloads/PowerBroker-Identity-Services-Open-Edition/?Pass=True

I got the same problem, «Your password will expire ...» mesage and the
Password box.

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https://bugs.launchpad.net/bugs/783598

Title:
  Notify users about expired credentials instead of showing login error.

Status in Light Display Manager:
  Fix Released
Status in “lightdm” package in Ubuntu:
  Fix Released
Status in “lightdm” source package in Oneiric:
  Fix Released

Bug description:
  LightDM doesn't warn users with expired logins when they try to login
  and instead it gives an uninformative login error.

To manage notifications about this bug go to:
https://bugs.launchpad.net/lightdm/+bug/783598/+subscriptions

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