Unexpected 401 when using NetworkService in Web Service call

When you are calling any CRM Web Service and you decide to specify your own credentials by using a new instance of NetworkCredential, then you should make sure that you are not specifying the 'UseDefaultCredentials' after you have specified the Credentials. This will cause IIS to not fully understand how to authenticate. The result is that you will get this 401.2 error message: Unauthorized: Access is denied due to server configuration. Internet Information Services (IIS).

So this code causes the error message:

CrmService service = new CrmService();
service.Credentials = new System.Net.NetworkCredential("user", "pwd", "domain");
service.UseDefaultCredentials = false;
service.CrmAuthenticationTokenValue = token;

And this is how it should be:

CrmService service = new CrmService();
service.Credentials = new System.Net.NetworkCredential("user", "pwd", "domain");
service.CrmAuthenticationTokenValue = token;