There were also many other steps I needed to take to configure this:
Be sure you have your AD settings configured correctly. There are a couple of good posts that will walk you through the proper setting.
I left the <!-- add name="Authentication" type="DotNetNuke.HttpModules.AuthenticationModule, DotNetNuke.HttpModules.Authentication" / --> line commented out.
Leave the site configured for Forms authentication. This is required, due to a bug in the current version that won't create the user otherwise.
Copy the windowssignin.aspx page from the admin folder, to the website root.
Set this page as your start up page.
In IIS, remove anonymonous access.
On the physical project folder, be sure to remove all but the required system and user roles you need to get to the files. IIS takes the path of least permissions, so if for example everyone can get there, it won't use your AD credentials.
I have been tweeking this install for a couple of weeks now, making all the pieces come together, so I may have forgot something. If you have problems, post it and I will assist if I can.