Please try if http://dovecot.org/nightly/dovecot-latest.tar.gz (or the CVS directly) works with you. I made a lot of changes to dovecot-auth, so I wouldn't want to make alpha4 release without some more testing in different environments. I'll release alpha4 in a few days, but it'll be basically same as this unless more bugs get fixed.
Some of the changes include:
IMAP: We might have sent extra EXPUNGE messages when output buffer got full. This could have caused various sorts of very bad behavior. This is the main reason why everyone should upgrade as soon as possible.
POP3: We sent duplicate replies for LIST command when output buffer got full. Probably caused Thunderbird's duplicate deletion bugs? (Although I thought someone checked that Dovecot's reply was correct when the bug occurred?)
pop3_uidl_format setting is now required to be explicitly set in configuration file for pop3 to work at all. I want to get rid of the old default setting which breaks Outlooks, and simply changing the default would break existing setups.
Multiple passdbs and userdbs of same type can now be added with different parameters. Some people asked about this earlier.
Authentication cache works now with other than SQL and LDAP passdbs. Some passdbs such as PAM require some additional settings to work. See example config file.
Some other fixes to authentication cache related to failure handling and non-plaintext authentication.
deny passdb wasn't working for non-plaintext authentication.