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IIS 7.5: Server Error 401 - Unauthorized: Access is denied due to invalid credentials.

I am developing a Web Site application that is running on our company's new virtualized web server.  The server is running W/2008 Server along with IIS 7.5.  The web site is being developed in vs 2010 using vb.

When I look at the web pages on the web server from my development computer using IE, I can connect and view with no problems.   However, when I open IE from a user's workstation using their login, I get this error message:  Server Error 401 - Unauthorized: Access is denied due to invalid credentials.

Here is some information from IIS 7.5 on the web server:

Authentication:
HTTP 401 Challenge = Windows Authentication, Status=Enabled, Response Type=HTTP 401 Challenge
Other = Anonymous Authentication, Status=Enabled

Application Pools:
ASP.NET v4.0, Started, Integrated
ASP.NET v4.0 Classic, Started, Classic
Classic .NET AppPool, Started, Classic
DefaultAppPool, Started, Initegrated

The actual sub code on the 401 error is 2 (401.2)

Thank you for any help.
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sammySeltzer
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Suggestion # 2 fixed the problem.  Thank you.