Configuring a more secure password hash for OpenLDAP

While working on the Galapagos infrastructure, we ran in to an interesting issue: using passwd(1) as an LDAP user would cause it to add another password instead of modifying it. Setting up the slapo-ppolicy(5) overlay then caused passwd(1) to then fail with:

password change failed: Password policy only allows one password value
passwd: Authentication token manipulation error
passwd: password unchanged

After consulting the #openldap channel on Freenode, the problem turned out to be that although OpenLDAP allows you to set olcPasswordHash on the root cn=config node, it does not work correctly when set there; it must be set under olcDatabase={-1}frontend,cn=config. Note, however, that olcPasswordCryptSaltFormat does belong in cn=config directly.