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PHP 5 compatibility issues are being worked on for future releases of XOOPS. Until these issues have been spotted and resolved, there is little else you can do for the time being, unless you move to a host that is not using PHP 5 yet. Considering how new PHP 5 is, this is going to be a major problem for current sites not only running XOOPS but also running other scripts as well.
Webhosts need to be very careful when upgrading to the 5.x series of PHP. Some people, including myself, feel it is premature for hosts to just jump right into PHP 5. Although it is much more powerful and lean, the effects of upgrading will have some ill effects for some people.
The mysqli extension allows you to access the functionality provided by MySQL 4.1 and above. More information about the MySQL Database server can be found at
http://www.mysql.com/ Documentation for MySQL can be found at
http://www.mysql.com/documentation/.
Parts of this documentation included from MySQL manual with permissions of MySQL AB.
In order to have these functions available, you (or your host) must compile PHP with support for the mysqli extension.
The mysqli extension is designed to work with the version 4.1.2 or above of MySQL. Considering XOOPS is not yet fully functional under a PHP 5 environment, some MySQL extentions may not work correctly, thus, you will need to wait for a compatable PHP 5 XOOPS release.
If your host were still running under the PHP 4.x umbrella, it is possible that the msqli extention would work with XOOPS, but I can't confirm that with any qualitative statement.