> Are you *absolutely positive* you're not pressing return at the
> password prompt instead?

Yes.

And I found the solution.

God I feel like an idiot.

I was putting stuff in /etc/profile to provide a bare minimum
environment for users without $HOME/.profile.  So I had something
like:

# not so annoying things above

if [ -f $HOME/.profile ]; then
	exit
fi

# annoying things below

Well, guess what?  Single user boots with sh reads this file :-)

so I put a test in to check and see that the hostname is set.  It works.

God, I must be a zombie...