SSHD/pam_limits

I have SLES9 SP3 installed in z/VM on s390x hardware. I am tring to install
Oracle Application Server 10.1.3.

Part of the setup requires editing of the /etc/security/limits.conf file to
increase the hard open files limit. The hard open files limit is currently
set at 1024 and the setup is expecting 65535.

My problem is, that once I change this file no users (not even root) can
remotely log into the system. If I shutdown the Apparmor software by
issuing an rcsubdomain stop command; the users can login to the system with
the proper settings.

The only information I have found pertaining to this issue is that
subdomain/AppArmor is proprietary software.