The point of PAM is that the application is not supposed to have any idea how the attached authentication modules will choose to authenticate the user. So all they can do is provide a conversation function that will talk directly to the user(client) on the modules' behalf.
Consider the case that you plug a retinal scanner into the login program. In this situation the user would be prompted: "please look into the scanner". No username or password would be needed - all this information could be deduced from the scan and a database lookup. The point is that the retinal scanner is an ideal task for a "module".
While it is true that a pop-daemon program is designed with the POP protocol in mind and no-one ever considered attaching a retinal scanner to it, it is also the case that the "clean" PAM'ification of such a daemon would allow for the possibility of a scanner module being be attached to it. The point being that the "standard" pop-authentication protocol(s) [which will be needed to satisfy inflexible/legacy clients] would be supported by inserting an appropriate pam_qpopper module(s). However, having rewritten popd once in this way any new protocols can be implemented in-situ.
One simple test of a ported application would be to insert the pam_permit module and see if the application demands you type a password... In such a case, xlock would fail to lock the terminal - or would at best be a screen-saver, ftp would give password free access to all etc.. Neither of these is a very secure thing to do, but they do illustrate how much flexibility PAM puts in the hands of the local admin.
The key issue, in doing things correctly, is identifying what is part of the authentication procedure (how many passwords etc..) the exchange protocol (prefixes to prompts etc., numbers like 331 in the case of ftpd) and what is part of the service that the application delivers. PAM really needs to have total control in the authentication "procedure", the conversation function should only deal with reformatting user prompts and extracting responses from raw input.