I have an ASP.NET web form using Microsoft's boilerplate Active Directory login page, set up exactly as suggested.

Windows Authentication is activated on the "Default Website" and "MyWebsite" levels, and Domain\This.User is given "Allow" access to the site. After entering the valid credentials for This.User on the web form, a popup window appears asking me to enter my credentials yet again. Despite entering valid credentials for This.User (after attempting Domain\This.User and This.User formats), it rejects the credentials and returns an unauthorized security headers page (error 401.2). Active Directory user This.User is valid, the IP address of the AD server has been verified and SPN's have been set up for the server.

Error Code: 0x80070005

Default Web Site security config:

<system.web>
    <identity impersonate="true" />
    <authentication mode="Windows" />
    <customErrors mode="Off" />
    <compilation debug="true" />
</system.web>

Sub web site security

<authentication mode="Windows">
    <forms loginUrl="~/logon.aspx" timeout="2880" />
</authentication>
<authorization>
    <deny users="?" />
    <allow users="*" />
</authorization>