I haven't found a fix yet but here are my observations from when I was trying to sort this out the other day. I'm going off of memory but with <add name="Authentication..../> uncommented a piece of code call OnAuthenticated_Request is called well before anything else AD related is called. Actually the procedure is called three times. The first time it has the correct url I believe (http://myintranet/dnn/child), the second webresource.axd, and the third ends up being something like http://myintranet/dnn/default.aspx. You may notice on occasion when you go to http://myintranet/dnn/child the url ends up looking like http://myintranet/dnn/default.aspx?alias=myintranet/dnn/child and that's where I think things are getting hosed. When a user normally clicks Login a fair amount of information is stored (PortalID, return url, etc) but with the automatic login it all takes place before a lot of that information has been collected and that's where things get screwed up. I've looked at trying to capture that info in OnAuthenticated_Request but the problem becomes how do I know if I've captured the right information. I do plan on talking with the Core team architects to get their insights and possibly they may have an idea that I haven't looked at yet.

I haven't looked at Authentication turned off on the parent and turned on on the child yet mainly because there's a bug in the current provider that doesn't allow it to be turned off. I've fixed that for a new release but forgot about the parent-no authentication/child-authentication scenario though I suspect the problem will still be there based on my observations above. However, this I do know works because it's how I tested things in your initial post. With Authentication turned on in both the parent and the child and with <add name="Authentication"..../> commented out it is possible to have AD authentication working on both the child and the parent out of the box. I'm not sure what will happen if some accounts have be automatically created in the parent portal already. My coding dev child site won't work properly when I try to manually login but I was trying different things and may have messed up the users tables. On my testing dev site I can manually login to both the parent and the child with my AD credentials but I did that without having run the sites with <add name="Authenticated".../> uncommented.