I attempted to change my password as an user in xterm (not as root), but the console answered that the password could not be changed...
I obtained root privileges and changed the password for the user, knowing that the warning was there for a reason, and from there the whole GUI started to act in weird ways... blank screens combined with slowness. (Like trying to resolve system calls conflicts)
It required 2 reboots before the GUI came to normal, but I will reflash the device just to be sure.
some of those reboots where not bringing the system up, so I assume that they were kernel panics...

Can anyone explain the situation or the logic that the developers of the operating system used to restrict multi-users capabilities on the machine? (I may be wrong in the latest statement)

N900 PR1.3 with CSSU latest update

Sounds weird. I changed my password same day I bought it and I haven't had any issues :/

Did you changed the user password? (vs the root password)? if so... for what reason? ( maybe ssh incoming connections?).. just curious

Note also that I applied the Community Updates and a long list of applications using Faster Application Manager

I changed both. (I have no idea what the default 'user' user password is, so I just changed it to one of my choosing for being able to SSH in as user. That's right, sometimes I don't want to SSH in as root.)

I've never had the issue you had (I've been through a couple of user password changes, at various 'ages' of the system post-whenever-the-latest-reflash-was), so I suspect something else went wrong on your device. (Or maybe some program you installed really was written in a way that expected user to have a specific password...*Shrug* It's definitely not the CSSU though, since I have that too.)

Both like Mentalist Traceur.