I can ssh into my server all day long as any user. If I sit at the console I can log into the GUI as anyone and open terminal windows to do anything. However, if I Ctrl-Alt-F1 on the console and try to log in it takes my username and password, flashes "Module not known" (I think that's what it says, it's really quick) and goes back to the login prompt. Logs don't even record the attempt, let alone the failure.
Have you tried running system-config-authentication .. changing something, and changing it back to the way you expect it to be? That should allow system-config-authentication to fix your PAM configurations. If you have any custom PAM configuration, make sure you re-apply those changes. I always recommend tarring or copying /etc/pam.d before making any changes to PAM configuration.
rpm -K pam and rpm -V pam wouldn't hurt either. Barry