After a fair amount of work, I'm happy to report that HTTP Digest Authentication is now a part of Rails 2.3. Although I put the finishing touches to get this into the release, it is based on work done by Dan Manges and Xavier Shay . Also, thanks to Don Parish for bug fixes and improvements after original acceptance.
Read more about HTTP Digest Authentication in Rails 2.3 Ryan's Scraps. Relevant Lighthouse entries: 1230, 1848, and 2000. The last one includes a change, not yet approved for 2.3, which allows for using the HA1 part of the digest to store a hash of the password, rather than the cleartext of the original version. Hopefully, we'll get a version of that in soon. Also, the current implementation depends on using a session secret when computing the nonce. 2000 proposes a way to avoid this so no session is required.
Hopefully. we'll see the open issues resolved and get this into a 2.3.1 update.