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IIS Integrated windows authentication - Why am I continually getting login prompt?

I am using IIS7 with windows auth enabled and anonymous auth disabled.
I have created a group with members for allow access to the site and put the group in the 'authorisation rules' along with deny for anonymous users.
I get a prompt to logon to site fine, but then when i open a word doc i get prompted again, even if i press cancel the word doc still opens up.  
This problem does not occur with pdf files.

any ideas???
thank you
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James Murrell
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If the client computers are in the same domain as the web site with the same domain suffix set in the NIC settings IE is smart enough to realize the site is "Local Intranet" and you don't have to change anything.
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much appreciated! Thanks for your replies and they work fine, but i am trying to also cater for IE8 on a pc out of the domain...any suggestions?
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Thanks for the insight Tedbilly, however this did not work for me and would not be viable as i have created this site especially for our Board Members who will logon from other domains or home and not from within my domain.

It somehow relates to MS Office  because i have no issues on pc's where MS Office is not installed and the doc's open up in WordPad, but this is not an option for me though.

Firefox works fine, but its not something i want to recommend to the site users. :(
Usually in situations like this some people will setup 'Form Based Authentication' with a LDAP membership provider. However, it means you have to sign in once per session.
anyone else have any solutions to the above problem??
Thanks for your help, i guess this is the only solution we could come up with, here are the steps..
1.      URL must be added in trusted site zone (Internet Options, Security Tab, Sites
2.      Automatic logon with current username and password must be checked (custom level), then pan down to “User Authentication”
3.      Username and Password must be stored for the site.  Control Panel, User Accounts, Advanced tab, Managed Passwords
nope