I'm also getting this error when I check the logs:
Sun Mar 4 0:55:28 CST 2007:- HTTP Basic Authentication failed. Can't retrive Merchant Id/Key, Installed over CGI??

I'm guessing I'm making some really basic mistake, but I don't know what it is since I reinstalled everything and started from scratch step by step.

Is there really a problem if GCO is my only method of payment? My whole reason for doing this is to get away from Paypal.