When you first configure kerberos authentication on IIS7 you will very likely experience 401 authentication errors when you try to access the site.

To workaround this problem, change the authentication to have kernel-mode authentication turned off.

On each front-end open IIS Manager, click the web site. Open the "Authentication" feature and select Windows Authentication. Then click advanced settings in the Actions pane. Remove the "Enable Kernel-mode authentication" checkmark and click OK.

This was tested on Windows Server 2008 R2, MOSS 2007 SP2 running a five-server baseline setup.