Christopher Even on SharePoint Search

Internet Explorer 8 causes 401 problems on SharePoint Servers using Host Headers. Don't install till you read this!

The issue appears when you use host headers in IIS to distinguish between your sites. If you try to open your NTLM based site locally it will return a 401 error after 3 tries to log in and any SharePoint webservices calls will fail also locally.

After installing IE 8 (or rather letting auto update run) I found that my SharePoint webservices calls were no longer working. I have webparts and sites that do webservice calls back to the same machine and have worked for 2 years without problems.

Here is the fix: (http://support.microsoft.com/kb/896861)

Method 2: Disable the loopback check
Follow these steps:

1. Click Start, click Run, type regedit, and then click OK.
2. In Registry Editor, locate and then click the following registry key:
   HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Lsa
3. Right-click Lsa, point to New, and then click DWORD Value.
4. Type DisableLoopbackCheck, and then press ENTER.
5. Right-click DisableLoopbackCheck, and then click Modify.
6. In the Value data box, type 1, and then click OK.
7. Quit Registry Editor, and then restart your computer.

From the comments, it appears it may have been caused by one of the updates that happened at the same time.