From what you've said so far, it sounds like a problem where the MySQL driver in PHP5.3 has trouble connecting to the older MySQL version 4.1. Have a look on http://www.bitshop.com/Blogs/tabid/95/EntryId/67/PHP-mysqlnd-cannot-connect-to-MySQL-4-1-using-old-authentication.aspx
There's a similar question here with some useful answers, Cannot connect to MySQL 4.1+ using old authentication
SELECT `User`, `Host`, Length(`Password`) FROM mysql.user
This will return 16 for accounts with old passwords and 41 for accounts with new passwords (and 0 for accounts with no password at all, you might want to take care of those as well).
Either use the user managements tools of the MySQL front end (if there are any) or
SET PASSWORD FOR 'User'@'Host'=PASSWORD('yourpassword');
FLUSH Privileges