Can't use new users?

[Ben]

So last night I installed FC3, added Fedora Extras, and did a yum 
update. Now I can't use any new users. Behold:

[root at dumont ~]# adduser nagios
[root at dumont ~]# su - nagios
Your default context is user_u:system_r:unconfined_t.

Do you want to choose a different one? [n]
could not open session

/var/log/messages has this to say about it:

Sep  2 17:34:21 dumont su[6229]: Warning!  Could not relabel /dev/pts/4 
with user_u:object_r:devpts_t, not relabeling.Operation not permitted

Something doesn't seem quite right, but I'm not sure what I'm missing. 
Here's are the selinux packages I've got installed:

selinux-policy-targeted-1.17.30-3.16
libselinux-1.19.1-8
libselinux-devel-1.19.1-8