Update: i have surfed the site with firefox and thus all was well.
i am making a few modifications to this article.
you dont need to enter the authentication nor change the provider from windows.
all you have to do is check the checkbox of anonymous access.
well it is working in FireFox but i cant get beyond the 401 in Internet Explorer.
Tried forms and any other authentication but for now they all seem to behave the same.
i even enabled anonymous login in the Internet Explorer security menu but it just expediates the display of the 401.
This guide is the extention of a Guide by Mark Harrison on configuring anonymous access to a Site in SharePoint 2007.
First you have to go to the administration site of the SharePoint server(You can look for its port in the IIS configuration on your server machine.)
after logging you will have to go to
1. Application Management (Tab or left list item).
2. Choose from application security the Authentication Providers item (on the right hand side of the screen)
3. Enable the Anonymous authentication.
Save the changes.
You might want now to restart the IIS. i found it saves time thinking what went wrong
4. Close the browser and open a new one pointing to the website you want to enable anonymous access.
5. In Site Actions (top right) open the sub menu Site Settings and in it choose Modify all Site settings
6. Under Users and Permissions choose Advanced Permissions
7. In the page choose Settings -> Anonymous Access
8. All that is left now is to set the level of access the Anonymous users will have to the site
Hope this one will save all of you the time i spent getting it done.