Here are the steps (Windows Server 2008, R2, IIS 7.5)
- create new virtual folder under default web site
- create new application in that virtual folder
- add helloworld.htm page to that application
access helloworld.htm with no issues using fully qualified name http://server_name/virtual_folder/application/helloworld.htm
for the application, change Security->Authentication to require Windows Authentication and not allow anonymous authentication
- in order to access same page you need to use ip_address instead of server_name.
Please help!
Thanks PV