Just a long shot, but did you notice any weird keyboard mappings when logged in over vnc? I installed tightvnc and gnome and the keyboard mapping was all wrong (e.g., typing asdf resulted in abfh). The solution was at http://blog.yclian.com/2007/12/3-solutions-to-gnomevnc-keyboard.html
# gconftool --set /desktop/gnome/peripherals/keyboard/kbd/layouts --type List --list-type String [aa]
So I wonder if your password isn't what you think it is. I guess that's a long shot though because I don't think you would have been able to type the 'passwd' command in the first place with the keyboard scrambled (or enter the current password correctly if the menus were used).
I don't think the fat.ko thing is a real problem (I commented that out of /etc/rc.local because it was failing anyway).