We have setup a NLB cluster between two Windows Server 2003 servers and this part appears to work correctly. There are two network cards in each server (one for the Heartbeat network 192.168.254.x and one for the main network 192.168.9.x) and if you physically unplug one of the servers then you can continue to ping the NLB cluster IP address. In NLB manager the cluster is listed as converged and there are no errors reported.
The issue appears to be with IIS on this setup. I have created identical sites on both servers as a test, with the default page displaying the IP address of the server that is hosting the page.
When accessing the cluster IP address, it always returns the IP address of SERVER2. If you then stop the website on SERVER2 you get the page cannot be displayed error (rather than the page fromm SERVER1, meaning that IIS is not failing over.
The webpage on SERVER1 is displayed if you access the cluster address on SERVER1 but it does not fail over in the other direction.
The websites on both servers are setup as the only website and there are no host headers setup. You can successfully browse the website on each server in IIS.