Access Denied when accessing local sites/webservices
Microsoft released MS09-014 and .Net Framework 3.5 SP1 which closed a vulnerability in NTLM authentication. If you’re browsing to your own machine, and the URL you’re browsing to doesn’t match the machine name, then NTLM authentication will fail. This affects calls to web sites and web services.
Possible solutions here: http://support.microsoft.com/kb/896861/en-us
From Larry Kuhn’s blog: