[Dovecot] Mysql access denied

[list at airstreamcomm.net]

Currently using dovecot 2.0.12 and mysql server 4.0.20 (I know, it's
really old) and having issues getting Dovecot to authenticate to the mysql
server.  We have confirmed that the credentials are correct and the host
machine can access the database, however we are getting the following
error:

Jun 23 08:12:50 hostname dovecot: auth: Error: mysql(databaseserver.com):
Connect failed to database (database): Access denied for user:
'sqladmin at ip.of.host.machine' (Using password: YES) - waiting for 1 seconds
before retry

We are assuming this has something to do with the password hashing
algorithm in older versions of mysql, but we are hoping to confirm this
theory and find a solution.

Thanks.