Thanks for the reply. There doesn't seem to be any reasoning behind which computers are able to successfully log on and those that are not. From my work laptop, a co-worker's laptop, and another virtual machine on our network, the logins fail. I've tried with both IE and Firefox. From another server in our DMZ, my iPhone, and my home laptop and desktop, the logins are successful.
When you say it could be the network process permissions, are you referring to the NETWORK SERVICE account? That ID has the proper level of access to the app folder as far as I can tell.
When I moved the app from DEV (where this problem does not exist), I simply copied the directory to PROD, replaced the server names, and duplicated the folder permissions. I restored the SQL Server from backup over the previous PROD db. The only difference I know of between the two environments is PROD has a separate server for the database, DEV runs everything off the same box.
Any more ideas out there? :)