Permissions on local net

I am creating a local intranet site to use for reporting and other tasks. Some reports should only be accessed by certain people. We are using a Windows 2003 based network. I'd like users to be able to use the site with their same login credentials. (ie if a user logs in to their computer as joe schmoe, I would like them to access the website as joe schmoe without any further login prompts.

Is this possible and/or how do I set this up? I've been playing around with the IIS settings and I cant seem to get it right, it seem to access files and such as the ASPNET user. Is there some setting I should have in the web.config file?

For now, the IIS is version 5.0 because it's ran in a Windows 2000 server...would it be eaiser to move the site to an IIS 6.0 server?If you're using a domain, the recommended way to do this is by using Windows Authentication (in the web.config file you can specify this by means of the <authentication mode="Windows" /> setting). Furthermore, if you want the files on the file system to be access under the context of the logged in user you'll need to enable impersonation (<impersonation enabled="true" />). To get this to work, you webserver should be at least a member server in the domain. However, I'd recommend to move to IIS 6 if you can for better ASP.NET integration and better security/performance.
With this, I get a configuration error:

Parser Error Message: Unrecognized configuration section 'impersonation'
Line 48: <impersonation enabled="true" /
Did you mean:
<identity impersonate="true" />
instead?

I have it set up with <identity impersonate="true" /> and in IIS, Anonymous access is unchecked along with everything else except Integrated Windows authentication.

However, when I attempt to create a file on a network share I get a prompt for a username and password even though the account I'm logged in as has administrator permission and full control over that share. the only way I can continue from this prompt is by enterent the full domain/username and password.

Both the server and client are members of the domain (we're in a single domain environment)