>I can't figure out why I'm getting a
>Username and Password dialog that pops up everytime
>I go to websites I'm setting up on my VPS.
>
>After I close the dialog without entering credentials,
>I'm getting a 401.1 error, "Access is denied due to invalid credentials".

I googled and found this:

http://support.microsoft.com/kb/827991

CAUSE
This problem may occur if the Default Domain property for Basic authentication 
is set to a backward slash character (\). In earlier versions of IIS, you could 
set the Default Domain property to a backward slash character (\) to allow the 
Web server to validate the logon credentials of a user against all trusting 
domains. However when you set the Default Domain property to a backward slash 
character (\) on a computer that is running Windows Server 2003, IIS will no 
longer allow the search for user credentials in all trusted domains. 

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