This blog will explain why Microsoft Dynamics CRM prompts for Windows Credentials when you log on to your development environment (configured for IFD ) using the server's IP address or the Host file configured URL (such as http://contoso.crm.grapecity.org).
This is basically determined by MS CRM by reading the registry value of the key [HKEY_LOCAL_MACHINESOFTWAREMicrosoftMSCRM]- IfdInternalNetworkAddress.
In reality, Microsoft Dynamics CRM will look at the IP address of the incoming request and match it against the internal range of the registry key specified. If the request is in the internal range of the registry key, it will give you a "Windows experience." If the IP address is external, it gives an "IFD experience."
This registry can be modified to switch between the windows and the IFD experiences (and this is supported :)). You will need to set the value for the "IfdInternalNetworkAddress" registry key in order to change the internal subnet of the IFD setting.
Philip Richrdson explains this well(Refer to : http://blog.philiprichardson.org/2007/12/20/switching-between-ifd-and-windows/)
For example, if the client is configured with an IP address of 192.168.1.2 (Subnet: 255.255.255.0):
When the internal range is 192.168.1.1-255.255.255.0 you will get a Windows experience. (assuming that this is the value which you provided in the config.xml file when Microsoft Dynamics CRM was installed.)
When the internal range is 192.168.1.1-255.255.255.255 you will get an IFD experience. This is because the client on the host operating system has an IP of 192.168.1.2 (Subnet: 255.255.255.0), which is outside the internal range.
Here are the two registry key modifications: