I've uninstalled nscd altogether, but that doesn't seem to be the problem. I've also compiled the latest ssh. It hangs in the same place, which only makes me believe that its pam even more. I forgot to mention that it hangs, but doesn't die. After about an hour or so, the session completes and the user is logged in normally. It must be a timeout issue of some sort, but I have no idea what it's hanging on.
Run the process that hangs (sshd?) in gdb, and do a backtrace. May give some clues. Maybe you need the source to sshd and pam, and maybe you need to recompile for that.. but it's easy to do this step by step.
/n