I have now solved this issue for me so I thought I would share.

I have my original 3.1 DotNetNuke database running on a SQL 2000 server and I wanted to keep it so I created another datadase called DotNetNuke_2, configured a new server with version 4.5.3, edited the web.config with the connection strings and though I was good to go, running the new server on the new and separate database.  I have been fighting this for three days and no matter what I did I could not login.  Same symtoms, I type in my username and password, the site seemed to accept it and it returned me to the home page with no host or admin menu and I was not logged in. (No error)

What I finally had to do was to take the machine keys from my first installation in the other web.config that were running on the other database and use the same keys on the new database for it to work.  I am not sure why they are linked but it sure would have been something nice to know before hand.

Good luck, hope this helps

Just thought I'd follow this up with everyone.

A new things I've only just noticed. Sometime we don't put 2 and 2 together...

All are running on a single machine - IIS, VS2003 and DNN 3.3.7.
If ZoneAlarm is running, I log into DNN and it goes back to the Home page without errors but does not log me in.
If I kill ZoneAlarm, I login to DNN and all works just fine. I get all relevant access per login.

SO, if anyone is running ZA on their machine(s), this may cause the odd login behavior in DNN.
I've tried giving all the DNN components access rights in ZA but to no avail.

You need to kill ZA to avoid this DNN login error, IF you're getting it.

Cheers