The /etc/pam.conf needs to be changed. I changed this file so my Domain users can log on both locally as well as with telnet. The following are the changes that I made. You can customize the pam.conf file as per your requirements, but be sure of those changes because in the worst case it will leave your system nearly impossible to boot.

#
#ident "@(#)pam.conf 1.14 99/09/16 SMI"
#
# Copyright (c) 1996-1999, Sun Microsystems, Inc.
# All Rights Reserved.
#
# PAM configuration
#
# Authentication management
#
login   auth required   /usr/lib/security/pam_winbind.so
login auth required  /usr/lib/security/$ISA/pam_unix.so.1 try_first_pass 
login auth required  /usr/lib/security/$ISA/pam_dial_auth.so.1 try_first_pass 
#
rlogin  auth sufficient /usr/lib/security/pam_winbind.so
rlogin  auth sufficient /usr/lib/security/$ISA/pam_rhosts_auth.so.1
rlogin auth required  /usr/lib/security/$ISA/pam_unix.so.1 try_first_pass
#
dtlogin auth sufficient /usr/lib/security/pam_winbind.so
dtlogin auth required  /usr/lib/security/$ISA/pam_unix.so.1 try_first_pass
#
rsh auth required /usr/lib/security/$ISA/pam_rhosts_auth.so.1
other   auth sufficient /usr/lib/security/pam_winbind.so
other auth required /usr/lib/security/$ISA/pam_unix.so.1 try_first_pass
#
# Account management
#
login   account sufficient      /usr/lib/security/pam_winbind.so
login account requisite /usr/lib/security/$ISA/pam_roles.so.1 
login account required /usr/lib/security/$ISA/pam_unix.so.1 
#
dtlogin account sufficient      /usr/lib/security/pam_winbind.so
dtlogin account requisite /usr/lib/security/$ISA/pam_roles.so.1 
dtlogin account required /usr/lib/security/$ISA/pam_unix.so.1 
#
other   account sufficient      /usr/lib/security/pam_winbind.so
other account requisite /usr/lib/security/$ISA/pam_roles.so.1 
other account required /usr/lib/security/$ISA/pam_unix.so.1 
#
# Session management
#
other session required /usr/lib/security/$ISA/pam_unix.so.1 
#
# Password management
#
#other   password sufficient     /usr/lib/security/pam_winbind.so
other password required /usr/lib/security/$ISA/pam_unix.so.1 
dtsession auth required /usr/lib/security/$ISA/pam_unix.so.1
#
# Support for Kerberos V5 authentication (uncomment to use Kerberos)
#
#rlogin auth optional /usr/lib/security/$ISA/pam_krb5.so.1 try_first_pass
#login auth optional /usr/lib/security/$ISA/pam_krb5.so.1 try_first_pass
#dtlogin auth optional /usr/lib/security/$ISA/pam_krb5.so.1 try_first_pass
#other auth optional /usr/lib/security/$ISA/pam_krb5.so.1 try_first_pass
#dtlogin account optional /usr/lib/security/$ISA/pam_krb5.so.1
#other account optional /usr/lib/security/$ISA/pam_krb5.so.1
#other session optional /usr/lib/security/$ISA/pam_krb5.so.1
#other password optional /usr/lib/security/$ISA/pam_krb5.so.1 try_first_pass

I also added a try_first_pass line after the winbind.so line to get rid of annoying double prompts for passwords.

Now restart your Samba and try connecting through your application that you configured in the pam.conf.