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Yes, it looks like PHP5 is the culprit.
I run my XOOPS site on top of Xampp, which by default uses PHP5 but also comes with PHP4. I switched to PHP4 and all of a sudden everything works like it's supposed to.
I've been struggling with this for a while, so I'm releaved to finally figure it out.
Thanks to all who posted here, I wouldn't have figured it out alone. In fact, I don't think I can take credit for figuring anything out.
If you use Xampp (lampp), it's very easy to switch to PHP 4.
See
http://www.apachefriends.org/en/xampp-linux.html and scroll down to:
Note to XAMPP since version 1.4.7Because such very new versions like PHP 5 always should be handled with care we decided to include both current versions of PHP into XAMPP: PHP 5.0.x and PHP 4.3.x. If you find out your PHP application doesn't work with PHP 5 you will be able to switch back easily to PHP 4.
By the following command you can switch "back" to PHP 4.3.x:
/opt/lampp/lampp php4
And with the following command you can switch back to PHP 5.0.x:
/opt/lampp/lampp php5
If you forgot which version of PHP is in use simply use phpinfo() or call this command:
/opt/lampp/lampp phpstatus