One of the big issues we've ran into several times is the authentication restriction of SharePoint 2003. Basically all of the users that must be identified on WSS 2 should be in the Active Directory. Managing (a lot) of these accounts is an issue for a lot of customers. Besides that, not all system administrators are happy with the idea that all external users that have to work with the WSS site, should be in the active directory.
Here at Tam Tam, we have chosen to store all those (customer) accounts in our AD, which results in thousands of entries, and a loss of control. We cannot make sure each account is still active or still belongs to that customer.
There are some tools to manage that (here, here and many other), but there definitely is a need for other authentication providers such as form based authentication.
Microsoft has solved this problem in SharePoint 2007. In the new version different authentication providers are supported. In fact, different providers can be used together for the same site! A major improvement which will make a lot of people very happy.
The SharePoint Team Blog has dedicated an article about this and how to configure multiple authentication providers for SharePoint 2007. A very into depth story which shows one of the big improvements of SharePoint 2007.
"Windows SharePoint Services (WSS) V3 contains several new features around authentication and authorization that make it easier to develop and deploy solutions in Internet facing environments, especially extranets. In the previous version of WSS, all security principals needed to resolve at some point to a Windows identity – either a user account or group.
WSS V3 is built upon the ASP.NET 2.0 Framework, which allows the use of forms-based authentication (FBA) to authenticate users into the system. By riding on top of ASP.NET 2.0’s pluggable authentication provider model, you can now support users stored in Active Directory as well as SQL Server, an LDAP directory, or any other directory that has an ASP.NET 2.0 Membership provider.
Although WSS V3 will not ship with any Membership providers, Microsoft Office SharePoint Server (MOSS) 2007 will include an LDAP V3 Membership provider, and ASP.NET 2.0 includes a SQL Server provider. But if you want to use a directory and can’t find a Membership provider for it, you can write your own! This is a key technology enabler for heterogeneous environments."
UPDATE: Just read a very cool article by Liam about LDAP Authentication in MOSS 2007. Check it out here!