Registration Authentication Problem: New accounts can't log in after logging out

[StitchJunkie]

I've tried everything I can think of. I have a new install, checked and I'm php5.2.5
Set up folders changed from 777 to 755.

Everything appears to be working except returning customers can't log in!!

Initially, customers can create accounts, order, products deliver ok (digital),....
PROBLEM: If customer logs out, they get authentication error if they attempt to log back in.

I haven't enabled friendly url, so should have had to do anything with htaccess.txt etc.

Anyone have any tips?

www.gingerbreadtearoom.com/prestashop