I fixed this problem by simply opening the port (113) for ident using IPCHAINS.. As long as the port is open, dalnet seems to let you in with whatever default settings e-smith uses.
I use the following commands to open up port 113.
ipchains -I input -p -tcp -s 0/0 -d 0/0 113 -j ACCEPT
ipchains -I input -p -udp -s 0/0 -d 0/0 113 -j ACCEPT
If anyone else has a better way to do this .. let me know

BC.