Using Apache 1.3.1 and PHP 4.0b2:

If there's an Apache directive for a custom 401 authorization required) error page, and that error page file is a PHP file type, the PHP handler parses through the file and then changes the request status from 401 to 200.  

The result of this is that if you have a PHP enhanced 401 error page, PHP prevents your browser from requesting a password because it changes the request status from a 401 to a 200.