Has anyone made update encrypted work?

[Dana Canfield]

Sorry to post on the same topic twice in a week, but I've been looking
at the archives and I see a couple questions regarding this and no
answers, so I'm wondering if anyone has gotten update encrypted to work.

As I understand it, the way the option should work is this:

You have an existing Unix password file with your users in it.
Set up Samba as a PDC with update encypted on, and encrypted passwords
off.
Run the mksmbpasswd script to create an smbpasswd file with "empty"
passwords.
Use smbpasswd -a -m to add machine accounts to the smbpasswd file.
Run the NT4 Plain Password registry hack found in docs directory.
Run like this for a while, allowing your users to log into the Samba
PDC, and it updates the encrypted smbpasswd file.
Eventually change the registry back and enable encrypted passwords.

Is this correct?  It seems that I have to be missing something.  When I
add a user to the smbpasswd file using smbpasswd -a, creating an
encrypted smbpasswd file entry, I'm OK.  But trying to log into the PDC
with a user who either doesn't have an smbpasswd entry, or has all X's
as the password fails.

Can anyone help?