After some testing and fiddling with the settings of the moss 2007 output caching, it hit me, this is (DOH ! ) the same as the asp.Net output caching.
we were using FBA ( forms based authentication ) and some of the personalisation and custom build webpart were not working correctly.
How to setup your output cache profiles the right way
open the site settings:
edit the cache profile you want to use:
Change the HTTP Headers to use * to vary by:
configure to use your cache profile:
Hope this will help others too !