Line 78 of index.php says "require_once( './LocalSettings.php' );"
LocalSettings.php was an existing file in the same folder as index.php.
All I did was add the code to the file.
I quickly installed on my test server as well and did not have the error you are receiving, where did you paste the code in LocalSettings.php, beginning or at the end? Between the <?php ... ?> tags?
I pasted mine at the end, just before the php close tag (?>). My bottom section of the LocalSettings.php file now reads:
# When you make changes to this configuration file, this will make
# sure that cached pages are cleared.
$configdate = gmdate( 'YmdHis', @filemtime( __FILE__ ) );
$wgCacheEpoch = max( $wgCacheEpoch, $configdate );
require_once("./extensions/PwAuthPlugin.php");
$wgAuth = new PwAuthPlugin();
$wgGroupPermissions['*']['createaccount'] = false;
$wgGroupPermissions['*']['read'] = true;
$wgGroupPermissions['*']['edit'] = false;
$wgGroupPermissions['*']['createpage'] = false;
$wgGroupPermissions['*']['createtalk'] = false;
$wgShowIPinHeader = false; # For non-logged in users
?>
One other thing you will have to change after you pasted the code at the proper place is change the location of the pwauth file in the ./extensions/PwAuthPlugin.php file as SME Server stores it in a different location, you should change
$pwauth_bin_path = "/usr/local/libexec/pwauth";
to
$pwauth_bin_path = "/usr/lib/httpd/modules/pwauth";
After placing the code at the proper place and modifying the pwauth location I was able to succesfully login using a already configured username.