Postfix & SASL Help

Hello,

I am trying to get postfix to work with SASL. So far, I have successfully
get non-unix account mailbox (virtual mail box) to work.
Mails are stored to the appropriate mailbox.

I am trying to get authentication to work, but everytime I try to login, it
says 535 Authentication Failure.

Trying 127.0.0.1...
Connected to localhost.
Escape character is '^]'.
220 xxx.mydomain.com ESMTP Postfix
ehlo xxx.mydomain.com
250-xxx.mydomain.com
250-PIPELINING
250-SIZE 10240000
250-VRFY
250-ETRN
250-AUTH PLAIN LOGIN DIGEST-MD5 CRAM-MD5
250-AUTH=PLAIN LOGIN DIGEST-MD5 CRAM-MD5
250-XVERP
250 8BITMIME
AUTH PLAIN aXNhYmVsbGEAaXNhYmVsbGEAaXNhYmVsbGE=
535 Error: authentication failed
^]
telnet> quit
Connection closed.

I am using plain authentication, that is using hash:/etc/postfix/sasl_passwd
The file contains the hostname, the username and the password. Here is an
example:

xxx.mydomain.com username:password

After making changes to sasl_passwd, I rebuild the passwd database by doing:
makemap -v hash sasl_passwd < sasl_passwd

Here is what I have so far in my main.cf
broken_sasl_auth_clients = yes
smtpd_sasl_local_domain = $myhostname
smtpd_sasl_security_options = noanonymous
smtpd_sasl_auth_enable = yes
smtp_sasl_auth_enable = yes
smtp_sasl_password_maps = hash:/etc/postfix/sasl_passwd
virtual_mailbox_domains = /etc/postfix/virtual_domain
virtual_mailbox_base = /var/mail/vhosts
virtual_mailbox_maps = hash:/etc/postfix/vmailbox
virtual_minimum_uid = 100
virtual_uid_maps = static:5000
virtual_gid_maps = static:5000
virtual_alias_maps = hash:/etc/postfix/virtual



Thanks,
Yupapa