I use MySQL 5.1 on all my servers without any problem. 5.1 now is more than 2 years old.
Regarding the username issue: MySQL has long had a limitation of 16 chars for the username. In older versions the server would accept longer names during login, but with 5.1 the server will truncate the user name and reject login. The solution is simple: rename longer names. But this shouldn't be an issue at all because the 16 char limit was in place for a long time. See http://dev.mysql.com/doc/refman/5.1/en/user-names.html