Could the fact that this uses a mysql database (and java) for managing users and password authentication be causing this problem?
Is there something in this:
Options Indexes FollowSymLinks +ExecCGI
AddHandler fcgid-script .fcg
AllowOverride FileInfo Limit Options Indexes
Order allow,deny
Allow from all
that will not work with mysql authentification. (This is only coming from a little reading on the net and having no idea of which I speak