Problem getting WSUS 3.0 working with ISA 2000

I am currently having a nightmare trying to deploy WSUS 3.0 onto a domain for a friend of mine.
To cut a long story short, updates have not been run on any of the domain machines for a very long time and it seems to be due to the ISA 2000 server blocking the automated updates (BITS) service, so a local WSUS server seemed appropriate to help solve the problem...

After installing WSUS 3.0 on a 2003 member server and running a manual synch I get the following error:
WebException: The remote server returned an error: (407) Proxy Authentication Required.
at System.Net.HttpWebRequest.GetRequestStream()
   at System.Web.Services.Protocols.SoapHttpClientProtocol.Invoke(String methodName, Object[] parameters)
   at Microsoft.UpdateServices.ServerSyncWebServices.ServerSync.ServerSyncProxy.GetAuthConfig()
   at Microsoft.UpdateServices.ServerSync.ServerSyncLib.InternetGetServerAuthConfig(ServerSyncProxy proxy, WebServiceCommunicationHelper webServiceHelper)
   at Microsoft.UpdateServices.ServerSync.ServerSyncLib.Authenticate(AuthorizationManager authorizationManager, Boolean checkExpiration, ServerSyncProxy proxy, Cookie cookie, WebServiceCommunicationHelper webServiceHelper)
   at Microsoft.UpdateServices.ServerSync.CatalogSyncAgentCore.SyncConfigUpdatesFromUSS()
   at Microsoft.UpdateServices.ServerSync.CatalogSyncAgentCore.ExecuteSyncProtocol(Boolean allowRedirect)

All computers on the domain cannot get updates via the BITS service (the icon when downloading auto updates appears but sits at 0% for a while and then disappears), the error in the windows update.log file is as follows:
2007-07-29      09:25:57:788       996      1890      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:57:788       996      1890      DnldMgr      Error 0x8024402c occurred while downloading update; notifying dependent calls.
2007-07-29      09:25:58:085       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:58:085       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:58:085       996      1238      DnldMgr      ***********  DnldMgr: New download job [UpdateId = {8E058E91-FA8C-4BB0-B1EE-90AC6BF6D7A3}.102]  ***********
2007-07-29      09:25:58:226       996      1238      DnldMgr        * BITS job initialized, JobId = {AAE67740-4BEB-4F57-8655-2AFFE0DC5044}
2007-07-29      09:25:58:226       996      1238      DnldMgr      BITS job {AAE67740-4BEB-4F57-8655-2AFFE0DC5044} using proxy = http=Trust me that this entry is correct but I've replaced the text here for security etc, bypass = <NULL>
2007-07-29      09:25:58:335       996      1238      DnldMgr        * Downloading from http://download.windowsupdate.com/msdownload/update/v5/psf/windowsserver2003-kb935839-x86-enu_09930c3ae97e3223e787646b4394aede46eecd4c.psf to C:\WINDOWS\SoftwareDistribution\Download\f1921ba434ee3d498f996cf17f1762e9\download\WindowsServer2003-KB935839-x86-ENU.psf.blob (2 subranges).
2007-07-29      09:25:58:585       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:58:585       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:58:601       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:58:647       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:58:647       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:58:647       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0
2007-07-29      09:25:58:647       996      1238      Service      WARNING: GetUserTokenFromSessionId failed with error 800704dd for session 0

I've got a windows update http and https rule setup for ISA2000 to no avail.
The strange thing is that if I browse to windows update in IE and manually start an update from there, the update works and also the BITS service kicks in and starts to download!

There is something going on here with ISA2000 that is not allowing proxy auth for some reason.
I have also got an anonymous allow rule set up for windows update on the ISA 2000 server and I have tried setting the WSUS server to use no login auth, that also fails as does using domain admin for proxy auth, both give the 407 failed auth error.

Admittedly I have not as yet tried using WSUS v2.

Any help here would be greatly appreciated as this company's domain is a real mess with no updates for a very long time. If you need any other logs/errors etc just let me know.Start Free Trial