Looks like python-openid bug I stumbled upon earlier that prevented Byteflow OpenID server interaction with OpenID 1.0 RP was resolved both in upstream (darcs repo) and via patch for current Debian package.
--- a/openid/server/server.py 2008-03-20 21:31:33.000000000 +0200
+++ b/openid/server/server.py 2008-03-20 21:31:45.000000000 +0200
@@ -609,6 +609,8 @@ class CheckIDRequest(OpenIDRequest):
"claimed_id")
raise ProtocolError(message, text=s)
+ elif self.identity:
+ self.claimed_id = self.identity
else:
self.claimed_id = None