I don't think it is possible. I had the same problem you did and the only conclusion I could come to was that it needs to know how to set permission for individual users.
By individual users do you mean the NT login or the DSN login (which in this case is SQL Authentication). Bah, either way it seems like Win2k has decided always to prompt. I wonder what would happen if I set it to NT Authentication and gave IUS_ServerName read access to database it needs?