Using "Integrated Security" w/Crystal Reports 11?

My shop has had problems using "Integrated Security" with Crystal Reports 11 ever since we installed CR 11. Our users logon to our network using an "Active Directory" logon. We use SQL Server 2005 as our backend DB and VB.Net 2005 as our development tool. Everything works just fine from a Development machine but when installed on a Terminal Server....it craps out. For some reason, everytime a user goes to print a CR from within a VB.Net app, we get the "Database Logon" screen. See below.

Here is a code snippet of a typical call to a CR report.

Code:

---

    Public Sub PrintStatusCodesListing()
        Try
            dErr.clsModule = "modReports"

            Dim crDoc As New rptStatusCodes

            With crConnectionInfo
                .ServerName = "HERCULES"
                .DatabaseName = "Drip"
                '.UserID = "testUser"
                '.Password = "password"               
                .IntegratedSecurity = True
            End With

            strFormula = "{tblStatusCodes.statusID} > 0"

            crDoc.RecordSelectionFormula = strFormula
            frmReports.crViewer.ReportSource = crDoc
            frmReports.crViewer.DisplayGroupTree = False
            frmReports.ShowDialog()

        Catch ex As Exception
            dErr.clsProcedure = "PrintStatusCodesListing()"
            dErr.clsMsg = ex.Message
            dErr.OnlineErrorHandler(dErr.clsModule, dErr.clsProgram, dErr.clsProcedure, dErr.clsMsg)
        End Try
    End Sub

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The RED highlighted code is in place now in production and we are still having this issue. All our online applications use the "Click-Once" technology. We have no DBA, so we are kinda "Flyin' by the seat of your pants".

Thanks for the help