Can't sign in to SharePoint with IE8 or IE7 - 0xc000006d errors

If like me you have SharePoint 2007 and Windows Server 2008 installed on the same computer for development purposes, you may find that you have problems signing into your SharePoint site once Internet Explorer 8 has been installed.

Update: This also appears to be happening on IE7 after the installation of recent Windows Update KB963027 - Thanks Virinder for the update.

The following errors appear in the Security Event logs:

An account failed to log on.

Subject:
Security ID: NULL SID
Account Name: -
Account Domain: -
Logon ID: 0x0

Logon Type: 3

Account For Which Logon Failed:
Security ID: NULL SID
Account Name: phil
Account Domain: PORTAL

Failure Information:
Failure Reason: An Error occured during Logon.
Status: 0xc000006d
Sub Status: 0x0

Process Information:
Caller Process ID: 0x0
Caller Process Name: -

Network Information:
Workstation Name: PACSERVER
Source Network Address: 192.168.105.1
Source Port: 57620

Detailed Authentication Information:
Logon Process:
Authentication Package: NTLM
Transited Services: -
Package Name (NTLM only): -
Key Length: 0

The sign in request seemed to be trying to log me on using a domain name called PORTAL, which doesn't exist but is the NetBIOS name of my SharePoint site URL - portal.pacdomain.local. When I tried signing on using the DOMAINNAME\Username format, the logon failed with the same message in the event logs.

To resolve the issue, I followed the steps documented in the following article - http://support.microsoft.com/kb/956158/en-us, which seems completely unrelated to the issue I was having as it references a problem when using SQL Server 2008 Reporting Services.

Update: This issue is also discussed in the following Microsoft article - http://support.microsoft.com/default.aspx?scid=kb;en-us;896861