One of the major difference between Mysql and 4 and 5 protocol is that the password hashing length has been increased. Thus Mysql 4 account password no longer works under 5.
In the Mysql 5 install directory, there should be a upgrade script to convert the passwords to the new format.
Regardless, there are much more important changes between 4 and 5 and it is still highly recommended to use the Mysql 5 client API, recompile php with mysq 5 support, than use Mysql 4 api with mysql 5 workarounds.
One of the biggest improvement in Mysql 5 is the binary protocol/prepared statements. It will resolve most of the sql injection problems that is all the rage these days. Unfortunately, too many opensource apps still target Mysql 4 users for compatibility. Can't blame them but I would rather get security than compatibility.