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Yes its possible but it needs a bit of manual configuration. See the "Using Windows Authentication for SQL Server" section of the LDSDSetup.pdf manual. Although undocumented until 7.3 this is also possible in 7.2.6 with the same steps if you apply patch 3867 (available from Support on request).
Hi Stu, thanks for that. Have never managed to get this to work. Can you let me know if you did and if you did anything extra to get it working.