After quite a lot of investigation, it appears that a change has been made in Vista that alters the way that documents are accessed from SharePoint libraries. This change now utilises the Web Client service included with Vista (which acts as s WebDAV redirector). I think this is where the problem begins, as this service does not appear to support persistent cookies in the same way as other Office applications. Consequently, when trying to open Office applications you are now prompted to provide authentication details as ISA Server interperests the request as a new anonymous connection because the persistent cookie is not being used.
An example extract from the ISA Server logs is shown below:
After a bit of investigation of the ISA Server logs it can clearly be seen that this behaviour has changed for Vista machines compared to Windows XP; with the Web Client service enabled the ISA Server logs shows several denied entries for anonymous connections using a WebDAV client agent. Comparing the behaviour with my Windows XP SP2 virtual machine, documents are accessible seamlessly by way of the persistent cookies and the ISA Server logs show the standard Microsoft Office/12.0 client agent.
An example extract from the ISA Server logs is shown below:
At this time, the only way I can solve the problem is to stop the Web Client service on my Vista machine and add the SharePoint external URLs to my trusted sites. Upon doing this, I can open documents seamlessly (just like on my Windows XP SP2 VM) and the client agent in the ISA Server logs shows Microsoft Office/12.0 or Mircosoft Office Existence Discovery client agents as opposed to the WebDAV one. Bizarrely enough, I have also found that if you cancel the password prompt the document will actually open. From looking at the ISA Server logs, it appears that when cancel is pressed the client falls back to the historic method and starts using the Microsoft Office/12.0 and Microsoft Office Existence Discovery client agents. This can be seen below:
However, with the Web Client service disabled, I can now no longer open a document in Read-only mode and then click the Edit Document link in the document information bar. This is not essential, as I can still open document in edit mode by using the Edit in Microsoft Word option from the document library interface, but this is potentially quite annoying for unknowing users.
I am not sure why the Web Client service is not able to consume the persistent cookies in the same way of Office applications, but until it can, I cannot see a clear way to provide a fully functional solution with Windows Vista. I could of course just tell people to click the cancel button when prompted are prompted for credentials, but this is not really an elegant solution! :)
Any ideas or suggestions, please comment!
Please Note: During my investigation I have tried the fix detailed in KB943280 but I have come to the conclusion that this fix is for a different problem although it appears to have similar symptoms.

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