Depending on the configuration, users are sometimes prompted for credentials when opening Office documents from SharePoint, even when Windows integrated authentication is turned on, and the SharePoint site is in trusted sites or the local intranet zone (and auto logon is enabled). Often, the user can simply cancel the authentication prompt, and the document will open just fine. Other files, such as PDFs, also open without a prompt. The reasons for this are complex, and you can read a good background on how Office opens documents from a web server in this KB article:
http://support.microsoft.com/kb/838028
There are several options and workarounds for dealing with this issue. One workaround is simply to disable the “options” call, which will disable the initial authentication prompt that users would have to cancel. Before attempting this, you should read the KB article to learn more about this call, and thoroughly test your environment.
To disable the call, just add the following code to the <system.webServer> section in the web.config file for each web application on each SharePoint web server.
<security>
<requestFiltering allowDoubleEscaping=”true”>
<verbs allowUnlisted=”true”>
<add verb=”OPTIONS” allowed=”false” />
<add verb=”PROPFIND” allowed=”false” />
</verbs>
</requestFiltering>
</security>