1) Did you, or did you not, reboot the system after making the changes?
2) Is the hostname correct in /etc/netconf
3) Does the user have an .xauthority file perhaps? Or an xhost command in his .dtprofile? Or something like that?
You could try to move the .dt and .dtprofile in his homedirectory to a save place and again try to login (with default settings) as that user. That might be a working workaround.
Every problem has at least one solution. Only some solutions are harder to find.