From the [link|http://twiki.org/cgi-bin/view/TWiki/TWikiDocumentation#Enabling_Authentication_of_Users|docs]:
NOTE: In the TWiki distribution package, the twiki/data/.htpasswd.txt file contains several TWiki core team user accounts and a guest user account. You probably want to remove those accounts by deleting the entries in .htpasswd. Do not remove the guest user if you want to allow guest logins.
It seems like deleting the guest user might solve the login problems. Ideally of course we'd like to be able to log in as the guest user or a "real" user, but if this does what it soulds like it should take be good enough most of the time.