I have read this thread with great interest since I had the same problem when installing NVidia drivers in Fedora.
I followed Wolf's suggestion and -voila - it worked. ( thanks Wolf )
I then tried to type "init 3" at the command prompt ( after typing in "su" ) and had the same prob as Nosewheelie.
Then I typed in "su -" instead and was able to switch to runlevel 3, then back to runlevel 5 ( init 5 )
someone told me that by using "su -" you set the proper path - in this case to /sbin
Of course that doesn't explain the inability of going to the /sbin directory and trying to run init ...