WPMU subdomain install conflicts with password protected intranet file directory

We have a client that is setup on a WPMU install with subdomains and domain mapping. The client has to have a password protected intranet file area for their employees. WPMU is setup on the root directory of their domain and the intranet area is a subdirectory from within there.

e.g. /WPMU-Domain.com/intranet

The issue is that as soon as .htaccess password protected directories are turned on, the WPMU install takes over the url and redirects to not found. Once password protected directories is turned back off the sub directory works fine.

I have tried several different Rewrite rules to override this but have not gained any ground. We are desperately trying to get this setup on their main domain as requested.