hmm I’m not able to replicate your behaviour. I created a simple demo user using adduser, and was able to login via SSH right after.
root@DietPi3:~# adduser demo
Adding user `demo' ...
Adding new group `demo' (1001) ...
Adding new user `demo' (1001) with group `demo' ...
Creating home directory `/home/demo' ...
Copying files from `/etc/skel' ...
New password:
Retype new password:
passwd: password updated successfully
Changing the user information for demo
Enter the new value, or press ENTER for the default
Full Name []: x
Room Number []: x
Work Phone []: x
Home Phone []: x
Other []: x
Is the information correct? [Y/n] y
root@DietPi3:~#
─────────────────────────────────────────────────────
DietPi v7.2.3 : 22:54 - Sat 06/05/21
─────────────────────────────────────────────────────
- Device model : RPi 3 Model B+ (armv7l)
- Uptime : up 1 minute
- CPU temp : 39'C : 102'F (Cool runnings)
- LAN IP : 192.168.0.12 (eth0)
- Info Text : !!! DEMO 32bit !!!
─────────────────────────────────────────────────────
demo@DietPi3:~ $
are you able to share cat /etc/passwd
Probably you might going to hide personal data