No, basic auth is disabled. I'm only using Windows Intergrated Authorization.
I was able to finally get it working again, although I'm not positive what did the trick. I went through all the recommendations in http://support.microsoft.com/kb/271071/
In the process of working through setting all the permissions, I found some orphanned SID's. Not sure what they were or used to be, but I also got rid of the policy references to them.
I also made sure that the LAN Manager Authentication Level policy was set to Send LM & NTLM - use NTLMv2 session security if negotiated
After doing all that, it started working again. I'm still not sure what happened to break it.
Bear