Yes, this is exactly the case, and this is the very rare case when players panic that their characters are lost.

THF account names/pw are stored in a separate database. When you try to log on using eqemu ls, you'll make an "account/pw check" to the eqemu ls database. When you use THF ls you'll make an "account/pw check" to the THF ls database.
For this reason, Eqemu accounts are "invisible" to the THF ls until you use the #setlsinfo in-game to register your eqemu account into the THF ls database, from that point, your eqemu account will have a valid username/pw combination to access your eqemu account characters over the THF ls.
I took an account that was created on the THF LS first, then created the same account name on EMU LS. I am able to retrieve characters on the THF LS; however the EMU brings me to a completely blank character select screen.
In this scenario, when you try to log on to your account via eqemu ls, you'll see (the new and blank) eqemu account, why you don't see any characters. When you try to log on via THF ls, you'll be logged in to your THF account and see your toons.
Also, since there's now an eqemu and a THF account with the same name, you won't be able to use this account name with #setlsinfo to register your eqemu account to the THF ls database. This is when players get the "account already in use" error. In this case you'll have to provide a new account name to access your eqemu account via the THF ls. (sounds weird, but you'll have access to the same account with different user names via different ls hehe)
I know it's a bit confusing. This system is a legacy. It just works fine so we never changed it.
These are the normal scenarios, 99% of the time:
1. You crate a THF account and have fun while playing till the end of time, using only the THF ls.

2. You have an eqemu account. You log on to THF and use #setlsinfo in-game. From that point you can access your eqemu account with both THF and eqemu ls.
I hope it make sense.
