I feel better now.
I have been using SharePoint 2010 for a few months now, and I had to do some work using SharePoint Server 2007. As usual, I built a lab using virtualization. In my lab I created a domain controller that runs SQL Server 2005 SP3 on Windows Server 2008. I then installed SharePoint Server 2007 on another Windows Server 2008 virtual machine as a small farm. The SharePoint server was configured as a Front-end and also as the Search/Query server.
My installs went really well. Central Administration came up, and everything was working well, until I created a Web application. I created a Web application that used the Team Site template, and then after I finished creating the Site Collection, I fired off my browser on the new front-end and put in the URL for my team site.
Of course, I was prompted for authentication. I entered the proper credentials, and it prompted me again and again, and then it failed. I refreshed, and it prompted me again, and again, and again.
The fix: Modify the registry on the front-end server.