Since my solution and fix for the August 2007 VPC out of my blog comments works I wanted to share it with a bigger audience. I also have to make this post since there are a few solutions out there that are incorrect. There are two possible solutions to fix the VPC.
The first solution is to remove the host header on the Microsoft CRM website and change port 80 to 5555 within IIS. After this open regedit and do a find and replace in the registry on http://crm and replace it with http://ds-srv-01:5555. Go to start/run and type in IISRESET. After that you should access Microsoft Dynamics crm via http://ds-srv-01:5555.
The second solution that has worked for me is explained here: http://support.microsoft.com/kb/896861
The description of this KB is:
"When you use the fully qualified domain name (FQDN) or a custom host header to browse a local Web site that is hosted on a computer that is running Microsoft Internet Information Services (IIS) 5.1 or IIS 6, you may receive an error message that resembles the following: HTTP 401.1 - Unauthorized: Logon Failed"
This issue occurs when the Web site uses Integrated Authentication and has a name that is mapped to the local loopback address.
After applying either one the fixes make sure you save the changes to the image. Please let me know how these solutions work out for you and which you prefer!