Had Same problem, here is how to fix

Tech-Archive recommends: Speed Up your PC by fixing your registry

From: Eric
Date: Wed, 31 Jan 2007 14:37:23 -0800

run "control keymgr.dll" from the run command and clear any entries that are in there. Also, if they upgraded to IE7 make sure under trusted sites, go to custom level and enable passthrough authentication located at the bottom of the list.

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