Definitely agreeing with Spook...your passwd file should be ABOVE your root directory (it looks like /var/www/ is your root, which is equivalent to yoursite.c.om).
As far as logfiles, your host may have them setup in a certain way, or accessible from some type of control panel... Although it looks like your log files MAY be in /var/log/ or /var/logfiles. However, that isn't a guarantee...and if there are multiple sites on that one machine, more than likely the logfiles will always be located out of individual local virtual directories.
As for your htaccess, nothing seems to be wrong with it. Provided that the path to your htpasswd is valid and does have read privileges, than both htaccess and htpasswd have been setup and uploaded as ASCII (no wierd LFs). And technically, your error document block should be just below the OPTIONS text, and before the authorization...Also, some hosts are odd, try removing the OPTIONS line completely and see what happens.