Password authentication systems

[neokosmos at gmail.com]

This may only be tangentially related to Python, but since I am coding
a password authentication system in Python, I thought I would ask here.

In Linux (and presumably other *NIX systems that support it), when
shadow passwords are enabled, the actual password is not stored.
Instead an encrypted version is stored.  Then, to authenticate the
password, the system re-encrypts the user's input to see if it matches
the stored, encrypted version.

Presumably, this is done using the crypt() system call (and,
fortunuately, Python has a builtin crypt module!).  Presumably, as
well, this is at least somewhat secure, assuming a source of
cryptographic randomness to use to choose the salt.  Are SHA1 and MD5
suitable for this sort of thing as well, or would I need to move to
something more "industrial strength" from, say, the pyCrypto module if
I wanted to avoid a dependency on the crypt module?