I also ran into this problem after upgrading a 12" powerbook g4 to Jaunty 9.04. I managed to login after doing the following:
Got to the root prompt after using stream303's suggested boot: ("Linux single" also didn't work for me)
Linux nosplash rw init=/bin/bash
After getting to "root@(none):" I tried "passwd <username>"
passwd: Authentication token manipulation error
passwd: password unchanged
I then tried "adduser test" (successful), created a password, and rebooted. Still no joy, same result for all users.
I booted to recovery mode again, verified that /home still had my original user and "test" user directories (it did) and tried changing the password again for test (successful) and for my original user (failed). (not sure if changing the password was significant or not so I'm making a note of it)
From another thread someone suggested typing "pwconv" with success so I tried it and rebooted.
After rebooting my original user failed to login but "test" user and password returned the message "adding user test" and logged me in!
I booted to recovery mode again to see if I could repeat the "authentication token manipulation error" when changing my original user password but this time it was successful. I was able to login with my original user after rebooting.
I'm not sure which actions did the trick as I'm a noob but maybe it'll help.