I have made these changes as per "BendItLikeBednar " post and it worked.
But I don't wish to do this on my 50 workstations and not knowing why I need to do this?... please help
Made the below changes to my secpol and everything started working:
1. Start -> Control Panel -> Administrative Tools -> Local Security Policy
2. Navigate to Security\Local Policies\Security Options
a. Network Access: Let everyone permissions apply to anonymous users - Set to Enabled
c. DCOM: Machine Access Restrictions - Add Anonymous, Everyone, Interactive, Network, System with full rights options set.
d. Network Access: Let everyone permissions apply to anonymous users - Set to Enabled
e. Network Access: Sharing security model for local accounts - Set to Classic
I'm thinking 2c or 2e. was the problem, but I'm not sure...