Getting page cannot be displayed error with Internet Explorer 8 for Explorer View on any OS Win 7/2k8

Issue

When you try to view the shared documents in explorer view for the site https://mysiteurl/default.aspx?PageView=Shared using IE8 browser, you are getting the following error “ Page cannot be displayed”

The approach we took to identify the Root Cause:

We capture the Netmon and the Fiddler trace while reproducing the issue from IE 7 and then IE 8 (working/non working)

In the non working one we see the following:-

HTTP/1.1 401 Unauthorized
Content-Length: 1656
Content-Type: text/html
Server: Microsoft-IIS/6.0
WWW-Authenticate: Basic realm="irgec"
MicrosoftSharePointTeamServices: 12.0.0.6421
X-Powered-By: ASP.NET
Date: Tue, 21 Dec 2010 07:06:13 GMT

So User-Agent is Microsoft-WebDAV-MiniRedir/6.1.7600 not IE.

Cause:

Looks like when you have basic auth WebDav Miniredirect is not able to get the windows token and then fails.

Resolutions:-

We set the Authentication to NTLM in IIS and that fixed the issue.