I installed and configured SharePoint 2007 on a farm but ran into a problem accessing the site from the web front end servers.

When trying to navigate to the site, SharePoint would prompt for user credentials, no matter who you were logged on as and then return a 401 error.

Spence Harbar has a really good article explaining this issue which is caused by a security feature installed in Microsoft Windows Server 2003 Service Pack 2003 (SP1). http://www.harbar.net/archive/2009/07/02/disableloopbackcheck-amp-sharepoint-what-every-admin-and-developer-should-know.aspx

He points to Microsoft’s KB article 896861, http://support.microsoft.com/default.aspx/kb/896861

which details two workarounds to resolve this issue.