The debian 4.1.0-1 version fixed this (MD5_CRYPT_ENAB can be set to
yes).

Note that the prefered solution would be to define ENCRYPT_METHOD to MD5.
(ENCRYPT_METHOD was introduced in 4.1.0 to allow new password encryption 
methods).

-- 
newusers uses crypt insted of md5
https://bugs.launchpad.net/bugs/51551
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