I don't know the exact cause of this problem. But maybe following may help:
Just try this i had tried and my prob got solved..............
1. Open firefox and type in the address bar about:config
2. type ntlm in the textbox.
3. Double click on network.automatic-ntlm-auth.trusted-uris and type localhost there.
4. Click on OK.
In your IE Browser:
1. Go to the Top menu "Tools" -> "Internet Options".
2. Then choose the "Advanced" Tab.
3. Then Scroll all the way down and "Uncheck" the Checkbox corresponding to "Enable Integrated Windows Authentication".
4. Then Click the button that says "Apply" and then "OK".
5. Close the browser and in a new browser try http://localhost.
Also make sure you have c:\inetpub\wwwroot folder
with the Read, Directory browsing, etc. permission.
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