Right click on Computer and choose "Manage" (or go to Control Panel > Administrative Tools > Computer Management) and under "Local Users and Groups" you can add a new user. Then, give that user permission to read the directory where the site is hosted.
Note: After creating the user, be sure to edit the user and remove all roles.
I have a Windows 2008 server that I'm working on, so my answer is not completely the same as what the OP has on a Windows 2003 server.
Here is what I did (recording this here so I can find it later).
I was having this same issue:
In my Web.config file, I had this section:
<system.web>
<authentication mode="Windows" />
<authorization>
<allow users="*" />
<deny users="?" />
</authorization>
</system.web>
Under IIS, all of these seems to be solved under the Authentication icon.
- Edit Permissions: Make sure your ASP.NET account has permission. Mine was not originally added.
Now go into the features of Authentication:
Enable Anonymous Authentication with the IUSR:
Enable Windows Authentication, then Right-Click to set the Providers.
NTLM needs to be FIRST!
Next, check that under Advanced Settings... the Extended Protection is Accept and Enable Kernel-mode authentication is CHECKED:
Once I did this, I went back to my web application, clicked the Browse link, and logged in without having to provide my credentials again.
I hope this proves beneficial to many of you, and I hope it is useful for me later as well.
Best Answer
You could do the steps in this article: http://msdn.microsoft.com/en-us/library/ms972958.aspx
And then just don't redirect to a login page. Basically you trap the authentication error and keep going.