currently, I believe that users are forced to drop back from htdigest to htpasswd due to the following issue.
This is a significant inconvenience, especially when many users have entered their passwords in the digest file and when multiple projects are involved.
The following is from http://trac-hacks.org/wiki/XmlRpcPlugin...
Problems with Digest HTTP authentication
The xmlrpclib.ServerProxy? client - as demonstrated in the following examples - will not work with a Digest-based HTTP authentication: you need to set up a Basic HTTP authentication on server side to make the examples work.
If you use the standalone Trac daemon, this means that you cannot use the tracd -a option (htdigest authentication file). Use trac --basic-auth (htpasswd authentication file) instead.