If the DIGEST-MD5 negotiation is done over an HTTPS connection instead of HTTP, does that prevent this list of disadvantages from Wikipedia?:
Digest access authentication is intended as a security trade-off. It is intended to replace unencrypted HTTP basic access authentication. It is not, however, intended to replace strong authentication protocols, such as public-key or Kerberos authentication.
In terms of security, there are several drawbacks with digest access authentication:
Many of the security options in RFC 2617 are optional. If quality-of-protection (qop) is not specified by the server, the client will operate in a security-reduced legacy RFC 2069 mode.
Digest access authentication is vulnerable to a man-in-the-middle (MitM) attack. For example, a MitM attacker could tell clients to use basic access authentication or legacy RFC2069 digest access authentication mode. To extend this further, digest access authentication provides no mechanism for clients to verify the server's identity.
Some servers require passwords to be stored using reversible encryption. However, it is possible to instead store the digested value of the username, realm, and password.
Similar to: Is BASIC-Auth secure if done over HTTPS?