Another option is to disable user management algogether and run n8n behind an auth proxy. For instance you can proxy it behind github or Azure at least until they add native Oauth support.
To get around the issue of accessing it I’m pretty sure you can expose the API using Path Prefix - though I don’t recommend doing that unless you lock down access to the API using some other method, or only use it inside your network.
It may be that some case where it’s adding a JWT Bearer as the authorization header, but ALSO trying to add/overwrite the basic auth Authorization header. So have a look at the headers sent in a normal request, then compare to a request to the API. Probably easiest to check the API explorer directly at /api/v1/docs/.