However, in IIS7, the only authentication modes listed are the default Forms, Anonymous and ASP.NET Impersonation.
To solve this, I had to install the basic authentication module for IIS.
For Server 2008:
- Server Manager -> Roles -> Web Server -> Add Role Services
For Vista and Windows 7:
- Control Panel -> Programs -> Turn Windows features on or off
Then navigate to: Internet Information Services -> World Wide Web Services -> Security
Enable the Basic Authentication option