On a hunch, I tried turning on identity impersonation for my web app. This
seems to have gotten me past this hurdle.
To sum up:
Turn off anonymous access in IIS Directory Security and ensure Integrated
authentication is on for the web app.
Set these settings in the web.config:
<authentication mode="Windows" />
<identity impersonate="true" />
Then do the standard WSE 3 setup.
No on to setting up the web service correctly... :)

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J. Ambrose Little
ASP.NET MVP/ASPInsider
-----
Non nobis Domine non nobis sed nomini Tuo da gloriam.
I had the same problem and the only way I made it work is with a Domain
Account with a Custom Principal Name using SetSPN.exe utility. I reported
this issue (does not work WSE 3.0 + XP-SP2 with ASPNET account) to
Microsoft-PSS in December 2005 and currently they have no reached any
solution about it (how to make it work with ASPNET account). May be WSE 3.0
documentation is wrong. Currently, they passed this issue to WSE 3.0 product
group.
BTW, with Windows Server 2003 everything works great by default (using
Network Services account for IIS process pool).
So, to sum up, yes, currently, over Windows XP-SP2, WSE 3.0-Kerberos does
not work with ASPNET account. The only way is using a Domain account with a
custom pricipal name (using Setspn.exe utility in a DC).
This way you do not need to turn off anonymous access in IIS.

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CESAR DE LA TORRE
Software Architect
[Microsoft MVP - XML Web Services]
[MCSE] [MCT]
Renacimiento
[Microsoft GOLD Certified Partner]
> On a hunch, I tried turning on identity impersonation for my web app. This
> seems to have gotten me past this hurdle.
[quoted text clipped - 61 lines]
> > What else am I missing, or will the kerberos turnkey assertion not work with
> > a web app client?
josh - 20 Jan 2006 00:18 GMT
I am experiencing this error while trying to use a Windows XP client
application to access a web service located on a W2k3 server. if i run the
client app on the server, it works fine. i thought since the service was
running on the server it should work even with an XP client app, but I can't
get it working. The documentation says to "Configure constrained
delegation", but I don't think I want that. I'm just trying to use the
Kerberos turnkey assertion in its simplest form. thanks!
josh
> I had the same problem and the only way I made it work is with a Domain
> Account with a Custom Principal Name using SetSPN.exe utility. I reported
[quoted text clipped - 77 lines]
> > > What else am I missing, or will the kerberos turnkey assertion not work with
> > > a web app client?