I will check the etc/group file, may already be in there as everything else says the user is but you never know
stranger things happen
Wheel group I am not familiar with and don't remember seeing it in the groups list? Never had a problem like this with Kanotix before and I am quite disappointed. It is almost pure sid and updating is supposed to be very easy but I may never find out
Nearest to this problem I ever had was with some other live cd/hd install I think morphix. Dialup simply was not supported for users and I never went any further with that distro.
Awhile back had a problem with kppp after some update that I had to change ppp config to no auth for users, but this problem is different - it definitely is related to the inability to get su going.