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Problem Statement - When I create an item in a Document Library named "My Documents", a new instance of Microsoft Word appears along with the credential window. Which is quit annoying issue from end users point of view.

Is it possible to avoid this pop up?.

Please let me know any solution to this issue.

A: 

Word always does an anonymous request first, something to do with WebDAV / The protocol Word uses to open the file. You can circumvent this by setting the session cookie lifespan to 1 year (or more). The first time you should still get the challenge popup, then the cookie will be set. This worked for me anyway.

P.S. here's more on the subject, just the reason behind this behavior though. old blog post

P.P.S. Here's where you set the timeout: MSDN: sessionState Element

Colin
Can you please tell me how to set session cookie lifespan to 1 year, I have created a site in WSS 3.0 (not in MOSS)?
Tejas