User Prompted for Password When Opening Office Documents in Browser

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When you open an Office 2000 document or follow a hyperlink to an Office 2000 document in a Web browser, you may be prompted to enter a password. If you click Cancel or type the user name and password, the document opens as read-only.

NOTE : You may need to type the user name
and password multiple times before
the document is opened in the Web

This issue occurs for the following reasons:

Our Web Servers are using Windows NT Challenge/Response or Basic authentication, or both. And Office 2000 documents are opened in a Web browser as read-write.
To resolve this problem, obtain Microsoft Office 2000 Service Release 1/1a (SR-1/SR-1a).
Microsoft has confirmed this to be a problem. This problem was corrected in Microsoft Office 2000 SR-1/SR-1a.

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