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Just to put some closure on this topic, Cavan and I have been able to fully resolve his AMS issues without doing anything drastic such as switching hosts. Cavan was kind enough to send me a copy of his XOOPS site and XOOPS database which I then setup on my own server.From there it became apparent what the problem was fairly quickly.
Cavan's website has a highly customised theme which does not use any blocks from the system, modules or custom blocks at all. Instead he choose to create his own buttons to create static links to all the functions on his site. The first mistake Cavan made was that he used absolute hard coded URL's in the paths to his buttons in his theme instead of using the <{$xoops_url}> smarty tag which would have been automatically replaced with the URL specified in his mainfile.php when being parsed through XOOPS smarty engine. The second mistake was that the XOOPS_URL value set in his mainfile.php was different to the URL specified in the hard coded paths used to link his buttons to his different website functions.
The effect this had was that users where being constantly logged out as they would log into the URL specified in mainfile.php, but when they clicked on the buttons they would be taken to the hard coded URL which was different, even though both URL's pointed to the same physical files. This also gave the impression that any module using the POST method for data entry (such as the News & AMS modules and many others) was broken as the referer information being sent by the client browser was incorrect due to the mismatch between the hard coded paths and the URL specified in mainfile.php.
Anyway, all is well now and Cavan is all setup on AMS 2.41. Using absolute hardcoded paths is never a good idea, but is a mistake that is easily overlooked when developing your site, I've done it myself without realising with one of the themes I released a while back. Rule of thumb is that if you are unsure of what smarty tags to use, then try and use relative paths as opposed to absolute paths if you can, and you *should* be ok.