I can confirm similar behaviour with Intrepid Xubuntu and kernel
2.6.27-11.

Initially, have the 1 user created at install time (member of admin,
adm, etc).

As this user launch the System>Users and Groups menu item. Select Unlock
and authenticate. Add a new 'Desktop User'. On committing, the applet
stalls for several seconds during which entries can be seen to be
removed from /etc/group (eg, repeatedly run 'wc -l /etc/group' in a
terminal). No user has been created. The group and passwd files have
been ruined, as described in earlier reports.

If a user is created by other means no corresponding entry appears in
the U&G list.

Victims of this bug should be aware of the update-passwd, pwconv and
grpconv commands which will greatly help to repair the system.

-- 
Users-admin fails with AMD-K6 processor
https://bugs.launchpad.net/bugs/240437
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