.htaccess and password protection by cpanel

I'm trying to add password protection via my cpanel on my server. I have a .htaccess file that rewrites my public_html root to public_html/links because I have VBaLinks as my main focus of the site.
This all works perfectly until I try and add the password protection. The cpanel protection adds a .httaccess file under the directory I want to protect which works fine as long as the root rewrite .httaccess file is not active. As soon as it is, the protected folder always give a 404 error.
Can anyone with better .httaccess skils then me tell me why? The code is posted below with the root .httaccess file first then the password protected directory .httaccess file second.

Thanks!

Latest Links on the WEB and Legendary Threads

Code:

# Turn on rewrites.
RewriteEngine on

RewriteRule index\.html index.php [NC,R]
RewriteRule index\.htm index.php [NC,R]

# Only apply to URLs on this domain
RewriteCond %{HTTP_HOST} ^(www.)?legendarythreads.net$

# Only apply to URLs that aren't already under folder.
RewriteCond %{REQUEST_URI} !^/links/

# Don't apply to URLs that go to existing files or folders.
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d

# Rewrite all those to insert /folder.
RewriteRule ^(.*)$ /links/$1

# Also redirect the root folder.
RewriteCond %{HTTP_HOST} ^(www.)?legendarythreads.net$
RewriteRule ^(/)?$ links/index.php [L]

Code:

AuthName "check"
AuthUserFile "/home/frest/.htpasswds/public_html/ppcheck/passwd"
AuthType Basic
require valid-user

You can try this entry from vBSEO's troubleshooting.txt:

16) I have a problem accessing vB admincp: 404 error is displayed or page is redirected to forums homepage.

If you have restricted access to your admincp folder using .htaccess (Auth directives), please check
your apache configuration: having "ErrorDocument 401 401.shtml" directive in httpd.conf requires that
"401.shtml" file exists. You should create one if it doesn't to solve the problem.

also, you probably want to move this.
AuthUserFile "/home/frest/.htpasswds/public_html/ppcheck/passwd"

password files should be BELOW public_html so that they aren't accesible by anyonje on the web.... just your webserver itself