I hope any of you guys knows how to fix this issue we are having.
We are trying to host a WCF service via the web. We set the web.config to have the service require
ASP.Net Development Server is very limited. It only serves requests originating from the same machine that it is running on, and it will not serve files that are outside of its application scope. It is based on the Cassini server. Cassini does not support WCF web services. Documentation for ASP.Net Development Server says that it does support NTLM. If you are just browsing to a page from the local machine it should work fine unless the page is referencing an unavailable resource.
check out http://msdn.microsoft.com/en-us/library/58wxa9w5.aspx for more info.