I had what looked like a weird issue when trying to connect to a newly build MOSS server using Sharepoint Designer. When I’d try to connect to connect I’d receive an error saying that the site was protected by a password, which shouldn’t have been a problem as I was using a Domain Admin account and the site owner account to connect to it. I thought that this may have been related to the initial failed attempt to get the site working with Kerberos security. The fix for this turned out to be a simple fix, through Central Admin / Application Management / Authentication Providers / Edit Authentication Providers and ensure “Enable Client Integration” is selected. This setting is what couples MOSS with all the Office Client Applications so it’s probably a pretty useful thing to have turned on.
Which leads me to the next bit of the “weirdness” that has occurred with this install, I’ve never had this issue before this is usually enabled by default. The only thing I can think that is different is that Kerberos was initially used instead of NTLM, where something had occurred that either didn’t enable the Client Integration or had disabled it.