When I set a parameter (variable name = test1, value = value1, Type = POST), it does not appear in $_POST['test1']. In fact, $_POST['test1'] is never set.

The post information instead appears in $HTTP_RAW_POST_DATA as "test1=value1".

Is there a way to have it set $_POST['test1'] = 'value1'?

Do you use Apache or SRV that comes with phped ?
Also check php version. $_POST[] came in php 4.2.0 as far as I remember. If you run any earlier version you'd not see $_POST[].