It looks like your WW server is reading authen_LTI.conf, since it is picking up the $external_auth setting. When you set that to 1, you will get the message that you quote if the LTI authentication fails.
Do you have any other authentication methods enabled?
Have you set up the link in Moodle as an LTI link?
If $debug_lti_parameters is set to 1, then when you click an LTI link in Moodle you should see a big warning message in WW that shows all of the parameters that were sent. If you don't see this, it means that LTI authentication isn't being invoked in WW.
Do you have any other authentication methods enabled?
Have you set up the link in Moodle as an LTI link?
If $debug_lti_parameters is set to 1, then when you click an LTI link in Moodle you should see a big warning message in WW that shows all of the parameters that were sent. If you don't see this, it means that LTI authentication isn't being invoked in WW.