Problems with IWA to a Virtual Directory pointing to another serve

I have a directory containing PDFs on a file server in our domain. Access to
these files is restricted to a couple of groups.

I have created a virtual directory on our W2K IIS 5.0 server which points to
the above directory and connects as a domain user that has been granted
specific permissions to the content on the file server.

I have removed the check from anonymous access on the IIS server and have
IWA set as the only authentication method for the virtual directory.

What I would like to happen is to have the IIS server prompt the user
accessing the virtual directory to login and then use those credentials to
determine access to the files.

What appears to be happening is that IIS is using the Connect As user's
rights and granting everyone access to the files without prompting for login
information.

Any clue what I have misconfigured?