This is not a JMB issue NOR a wordpress issue, but a http request issue :P
Here is the solution:
A) if your server is setup w/ predefined error pages, make sure you upload the appropriate 401 and 403 error pages.
B) if not, define your 401 and 403 error pages in .htaccess.
ErrorDocument 401 /401.shtml
ErrorDocument 403 /403.shtml
These pages must be static and on YOUR server. Once you correctly enter your password, you'll be taken to your protected area.
What happens without these documents is that wordpress serves up it's 404 page because these files don't exist.
These error pages can be filled w/ random babble and should be at least 512bytes if you use IE.
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