Looks like some of the stuff that I typed disappeared from the post.

I am trying to dynamically load a DLL that makes a call to a web service
method.

If I link the DLL statically and make the call, it succeeds. But when I
create the object using Activator.CreateInstance and then use the
InvokeMember, I get 401  error from the web service.

The file security on the web service is anonymous.

The web service location, method name etc is known at compile time. So I am
allowing to drop an assembly that will make the call to the web service.
These DLLs may have a bit more than just the proxy in it. I pass relevant
inputs to the method(s) in the DLL.