When I set home=UUID, the .Xauthority for tux (or any other account I create) goes missing, and I can't log in as anything but root. I've tried workarounds such as copying the .Xauthority from the live session when home isn't set, then pasting it back to /home/tux/ afterwards...still no luck. I've copied everything from /etc/skel/ to no avail. Nothing works.
It happens to me also. I've got the usb stick formatted in fat32. The fat filesystem doesn't preserve all file permissions from the ext2/ext3 filesystem. Try it for yourself: go to /home (/home must be mounted), create a file and then set it's file permissions to chmod a-x filename . It won't work. You can log in as root because when the slitaz filesystem image is created, /root is gziped into that image. And if you gzip some files, they preserve the permissions of the filesystem they were stored on, even if the archive itself is stored on a fat32 filesystem (which (fat32) doesn't preserve all file permissions). I've run into that problem when I wanted to move my /root to /home/root directory and found about the issue with file permissions.