Password protecting folder breaks PHP within that folder

[raab]

I'm trying to password protect a folder using htpasswd, works fine and asks for a l/p, however php in that particular folder refuses to work. PHP works anywhere else but the password protected location. Once I comment out the password protected location and restart nginx it's fine again. Wondering if someone can assist?

nginx.conf is here: http://raab.ftw.net.nz/nginx.conf

Posted at Nginx Forum: http://forum.nginx.org/read.php?2,27597,27597#msg-27597