You may experience authentication issues browsing http://companyweb on SBS 2003 and SBS 2008 servers after installing the cumulative security update for Internet Explorer (963027) or Internet Explorer 8.0.
When you try to browse Companyweb you will be prompted for authentication 3 times and eventually receive a blank page or 401.1. Your IIS logs will show your request failing with 401.1 Unauthorized.
Please use one of the following resolutions depending on the version of SBS you are running.
On an SBS 2003 server this issue can be fixed by applying update
Note: You must have .NET Framework 2.0 installed before you apply this update.
The workaround provided in the following blog post for IE 8.0 also applied to IE 7.0 with 963027 installed.
This issue will be fixed in upcoming update rollup for SBS 2008. We will update this post when it is available.
On SBS 2008 you can also implement method #2 from