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answers:

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I have one web server & one DB server (running SQL SERVER 2008). Both the servers are in different domains. The web server is allowed to communicate(the communication takes place internally without the intervention of firewall) directly with the DB server, it is given Admin privileges & the DB access through SQL is going on without any problems.But whenever the web server tries to access the Reporting Server & its services, its asking for a separate authentication(Local system account authentication has been configured for SQL Server). I want to know whether is there any way to get rid of this separate authentication for Reporting Services

A: 

If you are being prompted for credentials when running a report, then your data source is configured to prompt at run time. You'll need to change the DS to use a SQL login if you don't want this to happen. Your windows credentials cannot be passed from one server to another.

If you are being prompted to log on to the RS site - I've only experienced that on firefox but fixed with a firefox config setting to save the cred for the domain.

Sam