At a customer we experienced some strange behavior of MOSS 2007. When a user uploaded or opened a document in a library he had no issues. But when i created a new document using the “new” button he was prompted to log in again. This behavior according to Microsoft happens in Windows 7 and Vista for the following reason.

In Windows Vista, Internet Explorer uses the Web Client service when you use Internet Explorer to access a WebDAV resource. The Web Client Service uses Windows HTTP Services (WinHTTP) to perform the network I/O to the remote host. WinHTTP sends user credentials only in response to requests that occur on a local intranet site. However, WinHTTP does not check the security zone settings in Internet Explorer to determine whether a Web site is in a zone that lets credentials be sent automatically. If no proxy is configured, WinHTTP sends credentials only to local intranet sites. _

Note If the URL contains no period in the server’s name, such as in the following example, the server is assumed to be on a local intranet site:_

http://sharepoint/davshare

If the URL contains periods, the server is assumed to be on the Internet. The periods indicate that you use an FQDN address. Therefore, no credentials are automatically sent to this server unless a proxy is configured and unless this server is indicated for proxy bypass. _

Note A server can be indicated for proxy bypass either through the bypass list or through the proxy configuration script._ In this case, you are prompted to enter your credentials when the Web site asks for credentials. Even in this case, the security zone settings are ignored.

The solution for this was to add an extra value to the registry. Go to HKEY_LOCAL_MACHINE/SYSTEM/CurrentControlSet/Services/WebClient/Parameters Add a multi-string value “AuthForwardServerList” and add the URL as value. For more info check http://support.microsoft.com/kb/943280/en-us