Had an issue today where a developer was testing a web part that required a user profile, and an exception was being thrown that the user profile did not exist. We verified in the SSP that the user profile indeed existed, and also used the "stsadm -o sync" command to force a profile synchronization. However, we discovered that SharePoint was not seeing the actual user name that the user was logged in as, instead SharePoint saw it as "SHAREPOINTSystem". This led us to the following forum thread:
What ended up being the issue is that the developer had configured the SharePoint application pool to run as the same identity that he was logging into SharePoint as. We changed the configured identity in Central Admin -> Operations -> Service Accounts to use Network Service instead and the issue was resolved.