When you try to access files on a WebDAV site that uses only Digest authentication, the process may fail on a Windows Vista-based computer
On a Windows Vista-based computer, you try to access files on a Web Distributed Authoring and Versioning (WebDAV) site that uses only Digest authentication. However, the process may fail after you are prompted three times for your user credentials and password.
If you use a network trace when this problem occurs, the network trace may indicate that the WebDAV server generates a code 401 (Authorization Required) error.
For more information on this issue, including potential causes, workarounds, and resolutions, see: Microsoft KB Article KB941850.