PAM module for client/server application

Hi.

Among the forest of all available PAM modules in standard linux distros, 
I was unable to identify the one I should use to fulfill my need:

I'm developing a client/server application that needs authentication. 
I'd like this authentication to be handled by PAM. For instance, if I 
want to rely on linux shadow passwords for existing accounts, I'll have 
my server belong to the "shadow" group and use the "auth-common" module. 
So far, so good.

But I cannot use SSL or TLS for the client/server protocol, so I have to 
encrypt the user password. In such situations, I'd usually have the 
server send a one-time challenge, and the client respond 
sha1(pass+challenge). Or, if the pass is itself encrypted in the 
database, let say by some hash() function, the client would answer 
sha1(hash(pass)+challenge), and the server, knowing the real pass, can 
check authentication.

My understanding is that I *have* to give the provided password as is to 
PAM, because I don't have any mean of telling PAM *how* it should be 
compared to the stored password. Put it in another way, I cannot tell 
PAM "here is my <challenge>, the user provided 
<sha1(hash(pass)+challenge)>, please check that".

And so, it means the only solution is to encrypt the password with a 
reversible encryption function and not with a hash. Am I right?

Thanks,

   Claude