Now, mandating that a 'client' needs to be able to interact with a server using Digest is something competely different. That *may* be a way to increase interopability. It seems that that is the tact that WebDAV chose, unless I am reading the spec incorrectly:
"RFC2518 advocates Digest Authentication. There was some concern that although it doesnt transmit the password in the clear, the password or password equivalent still has to reside in a file on the server basically in the clear. They cant rely on that file being secure and felt that Basic Authentication over SSL or other transport level security was a better option."