Security and privacy

I think that once you have verified the authentication parameters, you just need to do something like:

// log in
$USER = get_complete_user_data('id', $localuser->id, $localuser->mnethostid);
complete_user_login($USER);

(around line 34 in /auth/mnet/land.php) get_complete_user_data can look up users using different fields, and you'll probably want to skip the last parameter.

/auth/mnet/land.php is the file that you get redirected to when you want to log into a remote Moodle using Moodle Networks, and it causes the user to be logged in automatically.