I've put together a package with three things:
- A template called Example Front End User Login that will show you how the front end login would work
- A module called Front End Users that has a simple name, email, and encrypted password field.
- A field type called Encrypted Password that creates password hashes.

You can download it here: http://www.timbuckingham.com/example-fr … -users.zip

You can install it by uploading the zip file in the Developer -> Packages -> Install section of the admin.

Let me know if you have any questions!