ISSUE
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On Windows 2003 you have an IIS web site, the web site is configured to only use Windows Intergrated Security. When browsing to the site on the Windows 2003 Server you are prompted for a login, when providing the correct details after 3 attempts you are denied access with a 401 error.
This was not an issue until several hotfixes were applied to windows.
Resolution
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Under AddRemove Programs (tick show patches)
See if KB957097 is applied under windows.
If so review KB896861 (Method 2 – Disable the Loopback Check – DisableLoopbackCheck) to resolve this issue
To disable NTLM reflection protection, you must modify a registry key on the client computer. To do this, follow these steps on the client computer:
Click Start, click Run, type regedit in the Open box, and then click OK.
- Locate and then click the following subkey in the registry:
HKEY_LOCAL_MACHINESYSTEMCurrentControlSetControlLsa - On the Edit menu, point to New, and then click DWORD Value.
- Type DisableLoopbackCheck for the name of the DWORD, and then press ENTER.
- Right-click DisableLoopbackCheck, and then click Modify.
- In the Value data box, type 1, and then click OK.
- Exit Registry Editor, and then restart the computer.
Note: You must restart the computer for this change to take effect