I have been unable to reproduce this both on a fresh installation of
Oneiric and on an upgrade from Natty (using cloud images). In both cases
I added a password to the "ubuntu" user, installed vsftpd from the
archive and successfully FTPd into it using "ftp", connecting to both
localhost and to the IP assigned to eth0.

Duane, thank you for your very comprehensive and useful bug report.
Could you please confirm that /lib/security/pam_shells.so does not exist
on your problem system, and let me know if /lib/x86_64-linux-
gnu/security/pam_shells.so exists instead?

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https://bugs.launchpad.net/bugs/869684

Title:
  530 login incorrect error after upgrade to Oneiric

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