This is a bit off a curveball, but why is it falling back to NTLM. I've had significant difficulty with security in active directory and WCF all related to service principal names (SPNs).
Kerberos will fail if you are running the service as something other than Network Service unless you have an SPN declared in the domain for your service. To set the SPN you need the windows server administrative kit, which has the command setspn.
setspn -A HTTP\machinename domain\service_account
This will then allow Kerberos to share client credentials to your service within the domain.
Please do some reading, as you could break kerberos for any other services running on the same box depending on your setup.