[Samba] Cannot connect to PDC from XP Pro

[Tom Conway]

Hello,

I know there must be a simple solutions to this. I have a home network,
samba pdc with xp pro clients. All works fine but I just added a new
user and cannot login from the nt clients. Only the new user is an issue.

I can login to linux and tested user login with smbclient. 
smbclient //host/home -U newuser
When I bump the loglevel, the users name is in the logs:
 check_ntlm_password: sam authentication for user [newuser] succeeded
 check_ntlm_password:  authentication for user [newuser] -> [newuser] ->
[newuser] succeeded

I assume it's an XP or encryption issue but I just can't fisure it out.
I use tdbsam as a backend and added the user with pdbedit (also tried
deleting and adding with smbpasswd)
Any help would be appreciated