Hi @AlBo,
I think you’re facing an issue because of the union fs, and the fact that when /etc/passwd (and /etc/group is modified, it ends up being stored on /mnt/flash (where the top layer of the unionfs is).
If you update the rootfs (= underlying union fs header), you won’t see the new version because the unionfs is hiding them.
To take your updated version, you can eventually wipe /mnt/flash or just remove these files from the unionfs. That would be in /mnt/flash/ufs/etc/ from memory.