Thanks for your error report. This was a bug in version 1.3. It now has been fixed in version 1.4
The problem was that the plugin was using the built-in WordPress authentication filters to make sure that only authorized access to your blog was possible. However, the way we did this was not compatible with php4 and also caused trouble on older WordPress installations prior to 3.0
Now, we're doing it in a totally different way that is more robust. We've tested the plugin under WordPress 2.8 and 3.0.1 with PHP5 and it is fine now. We also worked with every single user who reported a problem via our support site and everyone with this specific login issue has now reported the plugin to work.
If there is still an issue for you, please get in touch with us.