I have got it working from WindowsXP, it works if using https and you specify a subfolder.
On w2k3 however the webfolder component used when opening webdav folders is not even installed! As far as i can see it is not possible at all to use webdav to other than IIS from vanilla w2k3!!... Bastards are they not!? ;-)
It is possible to download the webfolder component from microsoft (requires WGA), It is part of office. When installed w2k3 has the same behavior as winXP when opening webdav folders from file -> open -> check "open as webfolder" in IE.
The file is called Webfldrs-KB892211-ENU.exe and can be downloaded from here:
The other option in windows is to map a network drive to webdav folder, but as far as i have been able to figure out this REQUIRES CIFS (windows) authentication.
I wonder how much development time at Microsoft is spent introducing artificiel limitations and paranoid licensing crap instead of actually trying to improve their apps.
btw, the subfolder limitation is not limited to IE, i cant seem to acces the root folder of my (virtual) apache server from any webdav client ??