If users are getting a password prompt when trying to open explorer view in SharePoint 2010 there are a few places to look. First understand there are two diffrent protocols, WebDAV and FPRPC. When using FPRPC there will always be a logon box. So how do we force webdav? Look at the quote below but just confirm that the Web Client Service is enabled and running on the client system.
The Explorer View prefers WebDAV over FPRPC. Because of the underlying design of the Explorer View and the default network provider order, it always tries to use SMB first, then WebDAV. Only when SMB and WebDAV have failed does it actually attempt to use FPRPC. This means that forcing the Explorer View to use WebDAV is more a case of creating an environment that makes sure WebDAV is successful instead of actually forcing the Explorer View to choose it.
The next logical question is what ensures WebDAVs success? Here is a list of things that you should avoid if you want WebDAV to be used as the underlying protocol for the Explorer View:
- Make sure all computers accessing the Explorer View have the Web Client Service enabled and running. This is the default behavior for Windows XP, but not for Windows Server 2003.
- Only host content on the default Web port of 80. If you need to host multiple Web sites on a single server, use host headers or multiple IPs to make those Web sites unique.
- Do not encrypt Explorer View traffic using SSL. SSL uses port 443, and the Microsoft WebDAV implementation does not work on ports other than 80.
This was taken from a Microsoft While Paper title – Understanding and Troubleshooting the SharePoint Explorer View.
EDIT:: New Information if some cases are not resolved! Microsoft KB You also need to add a registry entry to the clients machine with the URL of the SharePoint site