I am sure that the included lighttpd has not been compiled with webdav support.
I think I will try out the optware version if it includes support (I will have to take a look at the make files). Otherwise I will investigate compiling it with the appropriate configure flags, something like:
# ./configure --with-webdav-props --with-webdav-locks # make && make install
The config options seem relatively simple and I believe that dependencies include libxml2 and sqlite3.
from here: http://marxy.org/2006/12/webdav-server-with-lighttpd.html &
Anyone have any ideas of a possibly easier option?