Safari 3.0.4, the latest stable release for OS X 10.4 and 10.5, has a very annoying bug when asked for NTLM credentials. Basically, it sits in a loop and either hangs the browser, or eventually times out with an (I think) 401.1 error. I could reproduce this on 10.5.0, 10.5.1, and 10.5.2. I can't reproduce this now though since I just upgraded to the Safari 3.1 Beta (Seed 9B4021), and the issue has been solved. This has been causing me pain at work because the SharePoint and LiveMeeting sites uses NTLM by default with my Active Directory credentials.
I have no problems with it so far with the beta, actually one less problem than the stable release, and the browser is smoking fast. The WebKit team (rendering engine in Safari on both Mac OS X and iPhone OS X) have been doing an amazing job. The only way I know to get the beta is to signup for an Apple Developer account (entry level is free) and download the bits.
I spoke too soon. This must be a timing component to the NTLM bug I haven't figured out yet because I saw the issue again today on 3.1 Beta.
The NTLM issue was fixed in either the Mac OS X 10.5.3 or Mac OS X 10.5.4 software update, I can't remember which for sure, but i definitely don't have the issue on 10.5.4.