On services and authentication there is a section in the book that gives an example, as posted by Anthony in another thread: http://web2py.com/books/default/chapter/29/10?search=services+and+authentication#Services-and-Authentication
Thread on similar topic: http://groups.google.com/group/web2py/browse_thread/thread/fa1ada23498e2b30/34bd1ef34aadd230?lnk=gst&q=Authentication+using+xmlrpc#34bd1ef34aadd230
