OK, you actually provided a few more interesting informations than before, and 
they that can help us debugging that. Does this terrible bug only occur when 
you enter an empty password to authenticate? What do you mean with:
> Try Passwords "" (null), "ubuntu" and "root" but none accepted!
You should not expect those passwords to work, why would they? If you want to 
work from the live CD, you should set you user password first, and check that 
you are member of the admin group.

Could you also run
sudo /usr/share/system-tools-backends-2.0/scripts/SystemToolsBackends.pl -m 
UsersConfig --platform ubuntu-8.04 -v; sudo /usr/sbin/system-tools-backends -nd
before reproducing the procedure you described, from a *fresh boot*. Thanks at 
lot!

** Summary changed:

- Users-admin fails with AMD-K6 processor
+ Creating an user destroys most of users and groups configuration

-- 
Creating an user destroys most of users and groups configuration
https://bugs.launchpad.net/bugs/240437
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