Weird Windows integrated authentication problem between Web serviceand SQL Server

[Mario B.]

We have a weird Windows Integrated authentication issue between a Web
service using Data Application Block and a SQL Server. Here is our
setup :

- Windows 2000 Domain controller
- 1 Web application server - Windows 2003 + ASP.NET 2.0
- 1 Web ASMX web service built with Service factory and using Data
application Block v2.0.1.0 - Windows 2003 + ASP.NET 2.0
- 1 SQL Server 2005 using Windows Integrated authentication only -
Windows 2003

Settings for successful Kerberos authentication have been applied on
all tiers and it's working (SPNs, Trusted for delegation flag on
machine account, etc.)

- The Web service is impersonating users with a username and password
in Web.config file :
<identity impersonate="true" userName="DOMAIN\USER"
password="PASSWORD" />

- The Web service is using stored procedures to read and update data

Problem :

When we access the Web app, the request is passed to the web service
which uses a SQL Stored procedure to read data (using SELECT
commands). Those requests are successful. But when we use a stored
procedure which use 'UPDATE' commands, we receive the following
error :

Login failed for user '.'. The user is not associated with a trusted
SQL Server connection

We tried the same setup with a simple web app and Web service which
communicate directly to SQL Server... and it's working great.

Anyone have ideas ?

Thanks a lot for you help

Mario