Outlook 2003 always prompting OW for Exchange 2003

[Frankenherder]

OK, just did a fresh rebuild. In a domain, running Exchange 2003. I open outlook 2003, enter servername and user name, hit OK, then a box prompts me to enter a usrename and PW. I have never seen this before after setting up 100's of outlook to exchange set ups.

Any ideas? The authentication box is trying to authenticate to the local dekstop too which is weird....

Thanks
Matt