Radius using passwd file

["Sergio Belkin" <sebelk@gmail.com>]

Hi,
I am trying to run radius in order to authenticate against
passwd/shadow files (unix users), but I can't do that.
In radiusd.conf I have:

unix {
		
		cache = no
	        cache_reload = 600
		passwd = /etc/passwd
		shadow = /etc/shadow
		group = /etc/group
		radwtmp = ${logdir}/radwtmp
	}

And users file contains:
DEFAULT  Auth-Type = System
   Fall-Through = 1

When I issue :
radtest test test  localhost 0 testing123

It outputs:

Sending Access-Request of id 11 to 127.0.0.1:1812
        User-Name = "test"
        User-Password = "test"
        NAS-IP-Address = spike.myhost.com
        NAS-Port = 0
Re-sending Access-Request of id 11 to 127.0.0.1:1812
        User-Name = "test"
        User-Password = "\223O%\23105\016T\244\227\035\201\255a%{"
        NAS-IP-Address = spike.myshost.com
        NAS-Port = 0
rad_recv: Access-Reject packet from host 127.0.0.1:1812, id=11, length=2

Why??
Thanks in advance!
-- 
--
Sergio Belkin -