Thank you. That makes sense.
Italo is a fork of Oxen (previously Loki).
This is considerably different from Monero. For example, Oxen distinguishes between a restricted admin RPC port and a public RPC port, and Italo does the same.
I can now confirm that, as you say, without digest authentication the wallet API authenticates correctly. (I didn’t get the chance to fully test the italo wallet.)
In version 1.1.4 of the Monero coin adapter, I have added an option for basic authentication, so that all Oxen forks can be supported.