I have an on premises server running SBS 2011 Standard. Client PCs run Windows 7 pro. I had this problem in Outlook 2007 and now with Outlook 2010. I use a third party hosted email exchange server for all email accounts.
I set up my internet identity with remote.mydomain.com. Our email accounts with the third party host are xxx@mydomain.com.
Right after setting up the internet identity for my on premises server (remote.mydomain.com), Outlook running on all our PCs and for all our email accounts started asking for the exchange password repeatedly. I have to manually set up the email accounts and change the proxy settings manually to the third party host's proxy. I open Outlook, and it then performs a send/receive without a problem, but soon thereafter the password prompt appears and Outlook stops sending/receiving and indicates that it is not connected to Exchange or that I need to enter my password credentials for the server. No matter what we enter then, the password request continues and Outlook stops its connection with our third party hosted email exchange server. In reviewing the manual/advanced settings in Outlook, I see that the proxy settings I put in for the hosted exchange account are changing to reflect the on premises exchange OWA proxy of "remote.mydomain.com," and no matter how many times I change the proxy settings back, they revert again to "remote.mydomain.com." The problem persists. My third party host says its settings on the domain name are all configured properly.
How can I fix this issue? It seems to be something the on premises Exchange server is doing to the client Outlook account.