A couple of things to try:
1.Make sure that the directory you are trying to create the file in actually exists firsts. Then use the htpasswd -c to create it, then use just htpasswd by itself (w/o -c to add other users)
2. If that still doesn't work, it may not like the permissions on the directory or something.
I just tried it and it works for me on a FC1 box:
Code:
[root@Helios root]# mkdir /var/www/pass/
[root@Helios root]# htpasswd -c /var/www/pass/passwords user1
New password:
Re-type new password:
Adding password for user user1