Configure IIS 7.5 website to never shut down

for the error you are receiving

you'll probably need to look at using a local user account on each system with the same name and password. When you connect from ServerA to ServerB, which based your description are in a workgroup , having the same user id and password will help get over authentication issues between machines.

Another option would be to look at NULL sessions, which in itself is a security risk. Here is more information on NULL sessions.

http://www.microsoft.com/technet/prodtechnol/WindowsServer2003/Library/IIS/a4939515-b651-4ee0-b327-867b31fd8c9a.mspx?mfr=true

I would recommend going the route of using local accounts with the same password.

if you still have the message, try this

In ADD VIRTUAL DIRECTORY, select CONNECT AS and enter an administrator and the pass. Then all should be allowed or enter a user who has full access to the location

With regard to your second question about how to ensure that configuration changes are persisted to a site's web.config rather than applicationHost.config, this can be controlled via Feature Delegation.

If you navigate to the machine node of IIS Manager you will see an icon named "Feature Delegation":

Launch this IIS "applet" and you will be presented with a list of features that can have their configuration delegated to web.config.

Settings that are marked Read/Write will usually have their settings written to the web.config file. Settings that are marked Read Only will usually have their settings written to applicationHost.config and cannot be overridden in the web.config file.

As it so happens the <windowsAuthentication> configuration can be delegated to the web.config file.

Minor Gotcha:

Not all of the applets surface the full range of settings you can configure. A good example of this as it so happens is the <windowsAuthentication> useAppPoolCredentials attribute. It's no-where to be seen in the Authentication applet, not even under Advanced Settings.

However you can get at this value (and pretty much everything else) via the Configuration Editor. If you navigate to your web site's node in the left hand pane in IIS manager you will see this icon under Management:

If you launch the Configuration Editor you'll be presented with a dropdown list containing a tree of various settings:

If we select the /system.webServer/security/authentication/windowsAuthentication node we are presented with the full spectrum of settings that can be changed. Here we can see the setting we're interested in (useAppPoolCredentials):

You can choose whether to configure the values for the website in web.config or in applicationHost.config from the From: drop down list next to the config section tree drop down:

If a section has not been delegated as Read/Write in the web.config then you'll see the following:

We get an alert saying that this particular feature is locked, all of the settings are greyed out and disabled and there's a padlock indicating that child settings of this feature are also locked out.

Finally, not all settings can be delegated, for example site bindings, application pool, virtual directories.