I figured it out thanks to a posting on https://jonathanstark.com/questions.php
On my server machine: In Properties of the Default Website: Directory security
->Authentication and access control -> 'Integrated Windows Authentication' should be OFF.
This corrected the issue.
Heh. It must be Carey day. First you drop by the office, and then your post shows up at the top of my google query for this exact same problem.