I know it's not SBS but I am running ISA 2000 on Windows Server 2003 with OWA on a separate server and I had no problems with that configuration.
Normally I enter my logon credentials and I logon. I checked the box and it now asks me for the credentials twice and then logs in as before.
Did you run the "Publish Secure Mail Server" wizard? MS makes a point of saying you should NOT use server publishing for OWA, you should use the wizard.

Hey Peter,

With SBS, Microsoft has a special publishing wizard to properly integrate all the services in SBS with ISA 2000. SO that shouldn't be the problem.

When ISA is on a separate box, I am told this works fine. The problem exists when they are on the same machine, which isn't practical in this application.

Thanks for the suggestion though.

Odds are, you have conflicting auth methods in use. You can have user aut without checking the "must auth" checkbox if the web publishing themselves use "authenticated users" instead of "all users"

There are some important details missing; most notably the auth methods in use for ISA and OWA.
Q1 - what is the auth method in use at teh OWA; Basic, FBA, NTLM?
Q2 - what is the auth method in use at the ISA; Basic, NTLM, FDBA?
Q3 - did you use the CIECW to create the OWA web publishing rule?
Q4 - what does the web proxy log contain for those failing tests?

Hey Jim,

Sorry that this information was not included:

Q1: OWA uses FBA with "No Compression"

Q2: ISA uses "Integrated" authentication (NTLM)

Q3: Yes I used the CIECW to create the publishing rules

Q4: I will email you the logs as I would rather not have them blasted out on the net.