While Keyhotee IDs are not generally meant to be "case-sensitive", we've recently determined that they are case-sensitive in one aspect: when you create an identity, the exact string you type for your KeyhoteeID is used to generate the associated public key. For example, if your ID was "alpha" and you create your identity on one machine as "alpha" and on another as "Alpha", they will generate different public keys, even when you use the same brainwallet password. So don't do that :-)
We thought about changing this functionality, but it would require many people to re-register and it didn't seem like a big burden for users to remember the capitalization they used for their ID as well as their brainwallet password.
A related bug is that the current client allows two such identities to be created in one profile. We've fixed this bug in the repo, and the fix will be incorporated into new builds we plan to put up in the next day or two.