If the nickname on the server is "in use" it should assign them their nickname with 5 random characters behind it (as that's what it was scripted to do).
you can validate this behavior by opening the chat.tpl file and finding this line:
<param name="alternatenick" value="{$user.USER_DISPLAY_NAME}?????">
The only issue I can think of is if their nickname is a protected server name (such as root, serv, or admin, etc; something blacklisted as a server only name) If they're getting an error I'll need to see it to be able to say anything either way (it shouldn't just not allow them to load)