The Microsoft SharePoint blog has a new post called “Known issue: Office 2007 on Windows Vista prompts for user credentials when opening documents in a SharePoint 2007 site”. The article is a result of many reported support cases on this issue and contains a few possible (I repeat possible) workarounds.
We have had this problem ourselves and on several customers. In some cases these workarounds really work, but most of the times not. And the problem is not only with SharePoint 2007, we also see it for SharePoint 2003 installations so I think it’s more related to Vista, and its new security features, than SharePoint (the problem does not appear on Windows XP with IE7).
Let’s hope for a long time fix.