We recently had an issue where IE7 was dropping the authentication cookie but Firefox and other browsers worked fine. After searching the various forums and blogs it was determined that having an underscore in the domain name was causing IE7 to drop it's cookies. Very little information is out there on this and I couldn't find a MS Knowledge base article on it at all.
Removing the underscore from the web site domain name fixed the problem.
Problem: IE7 drops the authentication cookie when underscores are in the domain name. Solution: Remove the underscore from the domain name.
Does anyone know if there is a KB article on this or that MS is making a fix for IE7 for this yet?
It was one of our internal developer sites and we changed its name so it actually works now.
It was named web_dev3.site.com.
We changed the machine name to webdev3.site.com to fix the problem. I think that you cannot make a DNS record with an underscore so it may work as designed, however I can have machine names on my internal network with underscores and Firefox works fine with it. So if you want to replicate it you may have to make an internal machine name with an underscore.
I've seen it mentioned sporadically by some other blogs. I just haven't seen a knowledge article on it. for example