Well I didn't know that! Thanks. Can you explain (or point me in the direction of) the reason behind that?
Anyhoo the problem is still exhibited even when I use the physical IP. The situation is made more annoying by the fact that if I put the address of another server in the same domain into my hosts file along with a "made-up" name, e.g.:
10.100.1.2 mySite
I can then type http://mySite into the browser, enter the credentials and it works fine. The problem only occurs if I try to map the IP of the local machine to a "made-up" name. It makes me think that as part of the security features of IIS 6.0 MS added something that prevents this although I'm stumped as to why....