Ok, my app is installed on a server and accessed from PCs on the same domain -- Intranet app. I have it working in IE, which is cool with me. See this blog post on this site (I added my comments):

http://www.sqlservercentral.com/blogs/pturley/archive/2010/3/16/user-is-prompted-to-login-when-viewing-a-report.aspx

Hope this helps someone. Saved my rear end.