I wanted to use yubikey (in challenge-response mode) to login to the local machine without entering password, and still have the gnome keyring unlocked. I made updates to the PAM module and to the ykpamcfg command to make it possible. The password is kept in a file similar to the 'challenge' file, that contains challenge and password encrypted with the response to the challenge. It is re-encrypted with the response to a freshly generated challenge every time it is used.
This is the pull request at github:
https://github.com/Yubico/yubico-pam/pull/16Please could yubico programmers take a look and decide if they want to incorporate it into mainstream?
Thanks!