Can Not Configure MS CRM 4.0 Outlook Client

PROBLEM: 
  • You cannot configure MS CRM 4.0 Outlook 07 Client with Offline Access, with the Configuration Wizard on the client throwing error "The request failed with HTTP status 401: Unauthorized", followed by "Mandatory updates for Microsoft Dynamics CRM could not be applied successfully. Try running the application again." when trying to enter the CRM server name.
  • You may be able access CRM from the client computer using the web client, although depending on how the username/password was entered, you may also get "HTTP Error 401.1 - Unauthorised: Access is denied"
  • None of the rollups fix the problem
  • Client is running Windows Vista
  • Server is running Windows Server 2003 family, including SBS2003.


SOLUTION THAT WORKED FOR ME:
Our CRMAppPool in IIS had been set to identify using specific account (not Network Service) per https://mbs.microsoft.com/knowledgebase/KBDisplay.aspx?scid=kb$en-us$954045 to fix another issue we were having.

Changing the App Pool to use Network Service again fixed the issue. We were able to change the identity from Network Service back to the other account after configuring the client.

To change the identity account:
  • Go into Internet Information Services (IIS) Manager on the server 
  • Under <servername> / Application Pools, right click on CRMAppPool, and click Properties. 
  • Click on the Identity Tab, click the Predefined radio button and if not already selected, choose Network Service from the drop down list. 
  • Click OK 
  • Open up a command prompt and type iisreset 
Then try to configure the client. 

Others have mentioned changing the server address in the Configuration Wizard to either ServerIP:port or FQDN:port instead of computername:port can fix the issue. For instance, if your CRM server name is http://hellokitty:5555 and your local domain is catsanddogs.local, using catsanddogs.local:5555 or the IP address of the server (eg: 192.192.1.1:5555) instead of the server name can fix the issue. That is a long shot though.


OTHER POSSIBLE SOLUTIONS:
The following describe similar problems to the above but have different solutions:
Some people have found the abovementioned errors occur only when they are calling up reports. If this is you, try the following:
If none of these work, call Microsoft Support, as it could be some hitherto unknown thing that will commit you to an insane asylum if you try to figure it out alone.