[ubuntu] ircd-hybrid password problem

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http://ubuntuforums.org – I have installed ircd-hybrid from the Ubuntu repo. It is version 7.2.2. I can't get password protection to work. If I add a password= line to the auth block, it just doesn't allow any connections at all anymore. I have tried both a plaintext password and an encryped password (with mkpasswd), neither works. If I leave the password= line out, the server works fine (except for the password, obviously). I'm using Ubuntu 10.04. Please don't tell me to upgrade to 12, the 'server' has only 256MB RAM. (Hardware)