Unable to use webdav – fixed

I had a very peculiar issue at a customer site this afternoon. They are attempting to use webdav to a remote server on the internet but was unable to connect. Each time they put their username and password in they ended up with the message “Internet Explorer could not open http://WebSiteName as a Web Folder. Would you like to see its default view instead?” as documented at Kb220930. The solution in this article didn’t help but did point me towards the error log %temp%\Wecerr.txt. This contained the text “The Local Security Authority cannot be contacted” which didn’t help in a google search either.
The weird thing was that logging on as an administrator worked, but giving the user local admin rights didn’t work. However, at least this ruled out the firewall as the domain admin user could use it.
After about an hour I stumbled across the solution in kb269681 which isn’t clear enough to provide the exact solution – but it is straightforward.
Due to a bug in folder redirection it is possible to redirect %appdata% and somehow not have the %appdata%\microsoft\Msdaipp folder exist.
I created the folder and webdav started working.

Hopefully this post will help someone else with this rare and obscure problem.