$data is passed by reference and is set by the function isValidUser.
$err is also passed by reference and is also set by the called function only if there is an error.
Both variables are valid and being used properly. Without explaining the whole bridge I can assure you that neither $data nor $err affect the return of either function.
So your problem lies elsewhere. Have you synchronized the users?
OK, I admit I'm not the most advanced php programmer - only been dabbling with it for about a year. The users were synched fine. To make this short let's just say it works now (I had it working once before - but my isp switched me to a new server last week because I didnt want mysql v4.0.23 (now have 4.1 AND PHP5). I was convinced it was either a programming error or a php5 thing.
So what was the problem you ask? I was using jos_ as the "SMF Database Prefix:".

But that IS the SMF Database Prefix! smf_ is the "SMF Tables Prefix:". Even from the extra java popup help icon you call it the "SMF Database Prefix:"!
I'm not sure what country you are in - so it might just be a language thing, but (from a guy who did full-time Foxpro programing for nearly 10 years) you need ONE guy on your team who looks at things from the "st$p$d user"'s point of view and gets on the rest of you guys for things like this! I know that as a programmer it's easy to think something is working fine because it works the way you expect it to work BUT you have to realize that the "end user" is usually NOT going to do things the way you know that they should be done - but as the instructions tell them. The biggest success of an application lies in it's "user-friendliness" not in some slick code hidden "behind the scenes". Just like someone might go over the logic behind code - someone needs to go over the logic behind the wording of instructios given to the user. (We had a woman who's sole job was doing just that, so that us programmers could just stick to making it work!)
While this whole Joomla project is miles ahead of any CMS I have used (even when it comes to user-friendliness)- I would hate to see it fall behind just because users get frustrated with it. (And I see a LOT of frustration in this post.) I hope no offense is taken in my comments and suggestions, as they are written in good meaning.
I want to thank you and anyone who responded to my original post for the quick response. This seems like a great forum with some good people on it. It's the only Joomla site that is on top of Joomla - and not wasting my time by baiting me with old incompatible Mambo components and modules in their downloads.
Good luck and keep up the great work.
Thanks again,
Phil