>>Thanks Antonio, I did as you suggested and can now access the Security for folders, but changing the rights for IUSR_MyMachine to Full control still prompts for a username and password when I go to http://localhost.
>
>Well, if anonymous access is allowed by the Web server and the directory is open to your Internet Guest User Account, check if you're not trying to use any other resource that may be blocked (some default document, for instance) or triggering some other service that lacks specific credentials. Just for testing purposes, put a static html document named test.html in your root folder and see if it is accessed properly by a direct GET (http://localhost/test.html).

Yes, accessing index.html directly works.