Sharepoint 2003 had a serious OCD (Obsessive Compulsive Disorder). It was nuts about Windows Authentication, and thats about all it cared about.
This is a serious limitation that Sharepoint 2007 gets around.
So here is a new article talking about how you can enable custom authentication in Sharepoint 2007, and the practical sides of it - including how you deal with that in your development environment.
Hope you like it.