How to make simple system user authentication work with postfix/dovecot on 12.10?-Collection of common programming errors

I have been wrestling on this a LOT. I never properly understood but I presume that authentication by the system users is done with PAM and the default authentication method for both Dovecot and Postfix on Ubuntu.

I have tried with and without SSL but when I run Thunderbird on the same host, it figures out the configuration details but says the username or password is wrong.

dovecot.conf:

ssl = yes

ssl_cert_file = /etc/dovecot/server.crt
ssl_key_file = /home/andres/server.key
mail_location=mbox:~/mail:INBOX:/var/mail/%u
#userdb passwd {
# args = blocking=yes
#}
#passwd pam {
# args = dovecot
#}

I read that I the commented out sections were required, however they cause Dovecot to crash on start.

host name: andres.pa10b

mailserver address: mail.andres.pa10b (internal domain)

main.cf (postfix):

myhostname = mail.andres.pa10b
alias_maps = hash:/etc/aliases
alias_database = hash:/etc/aliases
mydomain = andres.pa10b
myorigin = $mydomain
mydestination = mail.andres.pa10b, andres-VirtualBox, localhost.localdomain, localhost, $mydomain
relayhost = 
mynetworks = 127.0.0.0/8, 192.168.10.0/24
mailbox_size_limit = 1024000
recipient_delimiter = @
inet_interfaces = all
inet_protocols = all
local_recipient_maps = unix:passwd.byname $alias_maps
smtpd_sasl_type = dovecot
smtpd_sasl_path = private/auth
smtpd_sasl_auth_enable = yes
smtpd_sasl_security_options = noanonymous
smtpd_sasl_local_domain = $myhostname
smtpd_client_restrictions = permit_mynetworks,reject_unknown_client,permit
smtpd_recipient_restrictions = permit_mynetworks,permit_auth_destination,permit_sasl_authenticated,reject 
smtpd_use_tls = yes
smtpd_tls_cert_file = /etc/postfix/server.crt
smtpd_tls_key_file = /home/andres/server.key
smtpd_tls_session_cache_database = btree:${data_directory}/smtpd_scache 

I could not find anything useful in logs. Maybe I wasn’t paying attention. How should I continue my investigation? Thanks!!