That was a struggle. Installed Ubuntu 9.10 Karmic which should postgresql for user authentication. Had this worked out perfectly on Ubuntu 8.04 but things have changed considerably since then. Just copying the files let to really weird errors.

For example just typing in passwd would give:

passwd: Authentication token manipulation error
passwd: password unchanged

This was actually caused by me loading pam_pgsql as before:

password   required     pam_pgsql.so

But now it needs to be:

password        [success=1 user_unknown=ignore default=die]     
pam_pgsql.so use_authtok try_first_pass

etc. Users couldn't login any more, only if you used ssh keys.

Googled for hours. Now I understand the issues better, I understand this guy has his settings correct if you're looking for an example (he uses ldap, but just replace that with pgsql).

The only thing that worries me is that it seems that pam_pgsql.conf needs to be world-readable now. That didn't use to be the case somehow.