Ok this was one of the weeks where I had some trouble with my environment…
After a year without problems this week had some challenges for me.
HTTP Error 401.1 - Unauthorized: Access is denied due to invalid credentials.
Here is the scenario: I have a development environment with Windows Server 2003 SP1 as a domain controller and Windows Server 2003 R2 as the SharePoint 2007 server. After applying a lot of updates I wasn’t able to browse my SharePoint web:
"You are not authorized to view this page"
“You do not have permission to view this directory or page using the credentials that you supplied.”
“HTTP Error 401.1 - Unauthorized: Access is denied due to invalid credentials.”
Soon I discovered that the reason was neither related to the SQL Server nor to insufficient permissions within SharePoint.
After doing an IIS reset the SharePoint web immediately prompted for an login without even starting the application pool.

Solution
I remembered that I had tried to enable Kerberos on the image which did not succeed. I also created SPNs in the active directory… So I just changed the IIS Authentication Settings to Kerberos and it worked again.

Ok enough challenges for the month… ;)