I was recently setting up Project Professional 2003 to access Project Server 2003. I received the error:
You do not have permission to view this directory or page using the credentials that you supplied because your Web browser is sending a WWW-Authenticate header field that the Web server is not configured to accept.
Project Pro was installed on a server (hey, I was short on machines). I got around the issue by uninstalling the enhanced Internet Explorer security from the server and adding the project server URL as a trusted site. I also had to verify that the permissions associated with trusted sites were set at the default level (low). This allowed me to access the project server from project pro with my domain account.
This should have been easy but was not :)