I am currently working on the authentication of an AJAX based site, and was wondering if anybody had any reccomendations on best practices for this sort of thing.
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Personally, I have not found using SSL for the entire site (or most of it) to be overkill. Maybe a while ago when speeds and feeds were slower. Now I wouldn't hesitate to put any part of a site under SSL.
If you've decided that using SSL for the entire site is acceptable, you might consider just using the old "Basic Authentication" where the server returns the 401 response which causes the browser to prompt for username/password. If your application can live with this type of login, is works great for AJAX and all other accesses to your site because the browser handles re-submitting requests with appropriate credentials (and it is safe if you use SSL, but only if you use SSL -- don't use Basic auth with plain http!).