Actually Arc it does say it, not in the original statement but in my following one (the second post)...
I think the problem is simply this:
the variables in the PHP code I don't have access to are NOT called the same way the HTML form fields variables are... In other words even though I can see from the form that the username field variable is called username and the password field variable is called password, as soon as those two values are passed on to the PHP file for processing the variables are probably renamed, for example:
username = $id;
password = $pw;
of course I don't understand how PHP could accept a code where variables sent from the HTML form don't start with a $ sign but so far I think it is the only explanation...
If somebody disagrees I'll happily consider different theories and solutions!