As far as I'm aware it just uses application variables for authentication and no form of cookie. I'm not sure if this is the same as sessions?
Either way, I'm also having problems with logging in just using the board login fields. When the user creates a new account on MY system, new accounts also appear for the forums, but when you try to login using the forum login it says the password is incorrect, even though it works for logging into MY system.
My system doesn't encrypt the password using MD5, could that be the problem?