Are you seeing this extra Windows prompt on MS Office files & not for other documents like .JPG or .PDF?
If so it could be that Word is following the url and issuing a WEBDAV OPTIONs http request to it. IIS tells word that it’s unauthorized, and word pops up the login box.
We can disable WedDav using Microsoft's KB article 2019105 and specificly, add the following to the web.config file
<system.webServer>
...
<security>
<requestFiltering>
<verbs applyToWebDAV="true">
<add verb="OPTIONS" allowed="false" />
<add verb="PROPFIND" allowed="false" />
</verbs>
</requestFiltering>
</security>
</system.webServer>