When you tried Forms Authentication did you also try adding impersonation in the web.config (page 5 of the AD User's Guide)? There have always been issues with Windows Authentication but I haven't had a chance to go through the code that I inherited to try to fix them which is why I push Forms Authentication so much.

I've found Forms Authentication with impersonation works for me the majority of the time. That said, I have run into a problem on my home test network where not all of the user's information is being pulled out of the AD (though the account still got logged in properly but email, street address, and one other thing that I can't think of at the moment didn't get populated). This didn't show up until I was coding the current release that in the Release Tracker and going back to the original didn't change anything which leads me to believe a MS patch on the server might have something to do with it though I haven't had time to test that out. I'm going to be looking at rewriting the code to take advantage of some of the .NET 2.0 functionality that was added (there's even more under .NET 3.0 but DNN minimum requirements are .NET 2.0 so I can't use them) and may end up with more of an LDAP AD provider as my research shows that it's much more stable than the ADSI that's the current provider is based on.