the work around described in this article worked for me
http://support.microsoft.com/kb/871179
To work around this behavior if you have multiple application pools that run under different domain user accounts, you must force IIS to use NTLM as your authentication mechanism if you want to use Integrated Windows authentication only. To do this, follow these steps on the server that is running IIS:
- Start a command prompt.
- Locate and then change to the directory that contains the Adsutil.vbs file. By default, this directory is C:\Inetpub\Adminscripts.
- Type the following command, and then press ENTER:cscript adsutil.vbs set w3svc/NTAuthenticationProviders "NTLM"
- To verify that the NtAuthenticationProviders metabase property is set to NTLM, type the following command, and then press ENTER:cscript adsutil.vbs get w3svc/NTAuthenticationProvidersThe following text should be returned:
NTAuthenticationProviders : (STRING) "NTLM"
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