PHP Version: 5
Shared or Dedicated Hosting: Shared
Link to your website: http://chat.tolkienguide.com
Are you able to reproduce the issue on the official demo (http://www.phpfreechat.net/demo)? Not quite. Since I am using the line of code
$params["nick"] = "guest".rand(1,1000); // setup the intitial nickname
that you have in your index.php included with the 1.2 release, though, I am assuming you can recreate it as well. (I put that line of code into demo2_simple_with_params.php, turned off frozen nick, and was able to reproduce it.)
Have you set any parameters? If so, please include your code.
See above. demo2 with the randomizer in the nick param reproduces it.
What is the issue you are experiencing in detail?
When launching demo2 (with randomized guest nick) in IE7, pretty much every time the AJAX refreshes the page, I get a new nick. This problem does not occur in Firefox 3 or Safari. I have left the nick randomizer turned on in my site for now if you want to see it happening there, but you should be able to reproduce using demo2 with the two param changes.
Are you seeing any error messages, such as javascript errors?
No, just getting kicked off by the noflood bot after a few moments.

Note that I do understand the workarounds and will continue with my XOOPS module integration, but wanted to point this out to you so that hopefully it could be fixed.