It sounds like something is interfering with the logon GINA.dll - the fact that you also had problems with IE authentication (although not directly connected) is suspicious.
What OS are you running? If XP, can you do a search for *gina.dll, and also check the contents of HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows NT\CurrentVersion\Winlogon - if there is any statement in there pointing to a gina.dll, that could indicate malware.
The default GINA is msgina.dll, and the current version is 974 KB (997,376 bytes), 14 April 2008, 05:42:00, version is 5.1.2600.5512 (Microsoft).
SD