If such simple mistake of blank or invisible character is possible with Nagios, I would conclude that error checking on nagios is not very good. Such invisible characters should be detected when a check was done.
My problem is actually not solved. I installed it from RPM which put most of the config together. I wish there is a way to easily debug it.
My setup actually allowed me to login but the Login As field says '?' as username. Putting "use_authentication=0" shows that everything works but this is not the right thing to do.