Hi Farok, I notice you haven't received a reply on this one. If you are running Alfresco as a test locally on your PC alongside Moodle you do need to make sure that they are not conflicting with ports etc (80/8000), and if you are installing on a server then although you can install Alfresco still on 127.0.0.1 you will need to use a hostname via DNS and etc/hosts or equivalent to be able to make a connection.
In either case however, you will still always get a username and password prompt from Moodle with the default Alfresco repository plug-in since it doesn't have any code to do a single sign on with Alfresco. If you want to do that you could try the Andresco repository plug-in which allows Moodle users to authenticate straight through to an Alfresco server, and also to do some other neat stuff like upload files from the Moodle interface through to Alfresco, and pull back title and description metadata. You can find it at: code.google.com/p/andresco.