I figured out that the function exec_setlanguage needs to be changed slightly in order to work with Asterisk 1.4.
The old command SetLanguage(xx) was replaced by Set(Channel(language)=xx)
Line 767 in phpagi.php:
// return $this->exec('SetLanguage', $language); // not valid anymore
return $this->exec('Set', 'CHANNEL(language)='. $language); // working replacement sind Asterisk 1.4