The reply from this thread (also mentioned here) about deleting your cached credentials solved the dialog box problem, but now I have a much worse problem. Now every time I open a document for the first time since the update that introduced the _vti_rpc dialog box, Word hangs and I have to kill
the process. Second time I open the doc it's fine, but for someone who works with Word docs all day long, this has crippled my productivity.
So consider how annoying it is to X out of the authentication prompt (which is harmless) vs. how annoying it would be to have Word hang every time you open a doc for the first time. If you mostly work with the same docs over and over, it might be worth doing
the above solution.