[Dovecot] Mysql access denied

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@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.