Top folder not recognized by TSVN

Hi All,
A colleague of mine has a problem with his working copy. He posted this
problem on the users list but no response so now
we try you guys :-)

The working copy stopped working after the server was moved into a different
domain.
We use http: and authenticate against a windows domain controller.
On commit the error message was "401 Authentication required"
He was using an older version of TSVN (_svn) so I suggested he upgraded to
the latest release.

It was only afterwards we realized that the working copy structure would be
changed by this version.
It didn't make any difference however and the "Clear authentication data"
did not produce a prompt for a username.

We decided to try a roll-back to the version the rest of the team is using
(without problems).

Fortunately he had made a zip backup of his WC before upgrading since he had
managed to do quite a lot of work
before realizing he couldn't commit.

So with this TSVN:

TortoiseSVN 1.3.5, Build 6804 - 32 Bit
Subversion 1.3.2,
apr 0.9.7
apr-iconv 0.9.7
apr-utils 0.9.7
berkeley db 4.3.28
neon 0.25.4
OpenSSL 0.9.8a 11 Oct 2005
zlib 1.2.3

We did the following:

- Rename folder with WC (FOLDER_NAME_1 --> FOLDER_NAME_2)

- Do SVN checkout from the server (HEAD revision) to a folder
named the same as WC was called before (FOLDER_NAME_1)

- Copy my files from FOLDER_NAME_2 to FOLDER_NAME_1, overwritting
what we just got from the SVN checkout.
We didn't overwrite the _svn libraries.

Doing the steps above worked for all the subfolders in
FOLDER_NAME_1/FOLDER_NAME_2, but the files in the root folder and
the root folder itself somehow still isn't recognized by TSVN.

Any ideas would be greatly appreciated.

http.conf contains this:

<Location /svn>
DAV svn
SVNParentPath E:\SubversionRepos
AuthType SSPI
AuthName "Subversion repositories"
Require valid-user
SSPIAuth On
SSPIAuthoritative On
SSPIDomain <OUR DOMAIN>
SSPIOfferBasic On
AuthzSVNAccessFile "C:\Program Files\Apache
Group\Apache2\conf\svnaccessfile"

<Limit PROPFIND>
    Order allow,deny
    Allow from all
    Deny from none
</Limit>

-- 
/Casper