I'm using IIS 7 Digest authentication to control access to a certain directory containing files. Users access the files through a department website from inside our network and outside. I've set NTFS permissions on the directory to allow a certain AD group to view the files. When I click a link to one of those files on the website I get prompted for a username and password. With most users everything works fine, but with a few of them it prompts for a password 3 times and then get:

401 - Unauthorized: Access is denied due to invalid credentials.

But other users that are in the group can get in without a problem. If I switch it over to Windows Authentication, then the trouble users can log in fine. That directory is also shared, and users that can't log in through the website are able to browse to the share and view files in it, so I know that the permissions are ok.

Here's the portion of the IIS log where I tried to download the file (/assets/files/secure/WWGNL.pdf):

2010-02-19 19:47:20 xxx.xxx.xxx.xxx GET /assets/images/bullet.gif - 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 200 0 0 218
2010-02-19 19:47:20 xxx.xxx.xxx.xxx GET /assets/images/bgOFF.gif - 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 200 0 0 218
2010-02-19 19:47:21 xxx.xxx.xxx.xxx GET /assets/files/secure/WWGNL.pdf - 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 401 2 5 0
2010-02-19 19:47:36 xxx.xxx.xxx.xxx GET /assets/files/secure/WWGNL.pdf - 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 401 1 2148074252 0
2010-02-19 19:47:43 xxx.xxx.xxx.xxx GET /assets/files/secure/WWGNL.pdf - 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 401 1 2148074252 15
2010-02-19 19:47:46 xxx.xxx.xxx.xxx GET /manager/media/script/_session.gif 0.19665693119168282 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 200 0 0 203
2010-02-19 19:47:46 xxx.xxx.xxx.xxx POST /manager/index.php - 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 200 0 0 296
2010-02-19 19:47:56 xxx.xxx.xxx.xxx GET /assets/files/secure/WWGNL.pdf - 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 401 1 2148074252 15
2010-02-19 19:47:59 xxx.xxx.xxx.xxx GET /favicon.ico - 80 - 10.5.16.138 Mozilla/5.0+(Windows;+U;+Windows+NT+6.1;+en-US)+AppleWebKit/532.5+(KHTML,+like+Gecko)+Chrome/4.0.249.89+Safari/532.5 404 0 2 0

Here's the Failed Logon attempt in the Security Log:

Log Name:      Security
Source:        Microsoft-Windows-Security-Auditing
Date:          2/19/2010 11:47:43 AM
Event ID:      4625
Task Category: Logon
Level:         Information
Keywords:      Audit Failure
User:          N/A
Computer:      WEB4.net.domain.org
Description:
An account failed to log on.

Subject:
    Security ID:        NULL SID
    Account Name:       -
    Account Domain:     -
    Logon ID:       0x0

Logon Type:         3

Account For Which Logon Failed:
    Security ID:        NULL SID
    Account Name:       jim.lastname
    Account Domain:     net.domain.org

Failure Information:
    Failure Reason:     Unknown user name or bad password.
    Status:         0xc000006d
    Sub Status:     0xc000006a

Process Information:
    Caller Process ID:  0x0
    Caller Process Name:    -

Network Information:
    Workstation Name:   -
    Source Network Address: 10.5.16.138
    Source Port:        50065

Detailed Authentication Information:
    Logon Process:      WDIGEST
    Authentication Package: WDigest
    Transited Services: -
    Package Name (NTLM only):   -
    Key Length:     0

This event is generated when a logon request fails. It is generated on the computer where access was attempted.

The Subject fields indicate the account on the local system which requested the logon. This is most commonly a service such as the Server service, or a local process such as Winlogon.exe or Services.exe.

The Logon Type field indicates the kind of logon that was requested. The most common types are 2 (interactive) and 3 (network).

The Process Information fields indicate which account and process on the system requested the logon.

The Network Information fields indicate where a remote logon request originated. Workstation name is not always available and may be left blank in some cases.

The authentication information fields provide detailed information about this specific logon request.
    - Transited services indicate which intermediate services have participated in this logon request.
    - Package name indicates which sub-protocol was used among the NTLM protocols.
    - Key length indicates the length of the generated session key. This will be 0 if no session key was requested.
Event Xml:
<Event xmlns="http://schemas.microsoft.com/win/2004/08/events/event">
  <System>
    <Provider Name="Microsoft-Windows-Security-Auditing" Guid="{54849625-5478-4994-a5ba-3e3b0328c30d}" />
    <EventID>4625</EventID>
    <Version>0</Version>
    <Level>0</Level>
    <Task>12544</Task>
    <Opcode>0</Opcode>
    <Keywords>0x8010000000000000</Keywords>
    <TimeCreated SystemTime="2010-02-19T19:47:43.890Z" />
    <EventRecordID>2276316</EventRecordID>
    <Correlation />
    <Execution ProcessID="612" ThreadID="692" />
    <Channel>Security</Channel>
    <Computer>WEB4.net.domain.org</Computer>
    <Security />
  </System>
  <EventData>
    <Data Name="SubjectUserSid">S-1-0-0</Data>
    <Data Name="SubjectUserName">-</Data>
    <Data Name="SubjectDomainName">-</Data>
    <Data Name="SubjectLogonId">0x0</Data>
    <Data Name="TargetUserSid">S-1-0-0</Data>
    <Data Name="TargetUserName">jim.lastname</Data>
    <Data Name="TargetDomainName">net.domain.org</Data>
    <Data Name="Status">0xc000006d</Data>
    <Data Name="FailureReason">%%2313</Data>
    <Data Name="SubStatus">0xc000006a</Data>
    <Data Name="LogonType">3</Data>
    <Data Name="LogonProcessName">WDIGEST</Data>
    <Data Name="AuthenticationPackageName">WDigest</Data>
    <Data Name="WorkstationName">-</Data>
    <Data Name="TransmittedServices">-</Data>
    <Data Name="LmPackageName">-</Data>
    <Data Name="KeyLength">0</Data>
    <Data Name="ProcessId">0x0</Data>
    <Data Name="ProcessName">-</Data>
    <Data Name="IpAddress">10.5.16.138</Data>
    <Data Name="IpPort">50065</Data>
  </EventData>
</Event>