When you have a public-facing site built using SharePoint technologies, opening Microsoft Office documents (Word, Excel, PowerPoint, Visio, etc.) stored on this website requires user to login. You can hit Cancel at the login prompt and still be able to see the document, but having a login prompt displayed to the Internet users, sort of defeats the purpose of having SharePoint-built public facing website with anonymous access turned on. This happens becuase Microsoft Office is closely integrated with MOSS or WSS 3.0 now, and MS Office is now able to recognize that the document is stored within SharePoint, so the appropriate SharePoint authentication/authorization tools kick in. This problem can be resolved mostly by implementing two simple steps (assuming you have already enabled anonymous access on SharePoint):

  1. Disable ‘Client Integration’ for the web application under Central Admin Home Page >> Application Management >> Authentication Providers
  2. Remove the OPTIONS verb from the <HTTPHandlers> registration line in web.config file
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