hwclock will not run on latest -mm kernels that do not have audit support compiled in - it fails with a message of "Error - unable to connect to audit system". This breaks all hardware clock setting functionality in the initscripts and from the command line in non-audit enabled kernels. While all official Fedora kernels do have audit support, custom built user kernels may not necessarily have this because audit support is not generally required. A similar problem came up with similar code in pam-0.80-6, and pam was modified to not use audit if it detected that audit was not enabled in the kernel. util-linux should do the same. See bugzilla #166422 for more information.
From User-Agent: XML-RPC util-linux-2.12p-9.9 setup-2.5.44-1.1 has been pushed for FC4, which should resolve this issue. If these problems are still present in this version, then please make note of it in this bug report.
Yes, confirmed as fixed in rawhide. Thanks..