Bumping with solution...
Given that the standard install methods posted (almost) everywhere for installing swat produce this "broken" form, I was truely surprised no one else had come across it. Then I found this bug report on the SAMBA site:
The upshot of which is that there is a bug in one of the SWAT dependancies but you can work around the bug with
sudo apt-get remove libpam-smbpass
NB: Your samba passwords will no longer be synced with your login passwords.