I had the same problem too, here is how i solve it...

Thats a security issue, make sure you set the security in iis regarding the virtual folder of dnn, the user set in anonimous login must have rights to access AD, also grant all possible permissions in the dnn folder (using explorer->properties->security) to the aspnet user and the user set in iis security.

If nevertheless is still not  not working, try the following, do a clean DNN install, install authentication mudule without changing the web.config (dont add it to the tab, yet), close dnn browser window, apply the TTT changes to web.config, now add the AD module to the tab.

Well that worked for me although i still have a couple issues to solve (like autologin based in the AD user credentials).

P.S.: Dont forget the 'identity impersonate=true'.

                                                                     Good luck, Renato.

Read this to understand security under ASP.NET

http://clientes.intranet.sizitech.net/temp/SecNet.pdf