You sir are a lifesaver.

If anyone else wants to know, I had to change auto_header = yes in pap section of radiusd.conf and set the encryption schema to crypt

then

in user file delete all just do single line entry per user which can be scripted easily from htpasswd.

username Auth-Type := PAP, Crypt-Password == "xx-crypted-pwd-from-htpasswd-xx"

From: Alan Buxey <A.L.M.Buxey@lboro.ac.uk>
To: Agent Smith <news8080@yahoo.com>; FreeRadius users mailing list <freeradius-users@lists.freeradius.org>
Sent: Friday, September 9, 2011 3:43 PM
Subject: Re: htpasswod authentication.

Hi,
> Can FR do htpasswd file based auth? Ideally I'd like to define users in
> users file with their crypto password right from htpasswd. Is this
> possible? how would a user file look like. I searched the docs and all I
> found was 'cleartext password' but I won't know that since its htpasswd.

does your htpasswd have md5, crypt or sha1? either way, should be able to handle
it, you'll just need to tag it right

eg you might be able to convert

john:n5MfEoHOIQkKg

to

john Cleartext-Password := "{crypt}n5MfEoHOIQkKg"

replace {crypt} with {md5}, {sha} as required: read the man page for rlm_pap for further info..
you might need to just use the 'right' password attribute type if the above isnt on the mark

alan