I spent several hours today beating my head against a wall and thought I'd post this in case anyone else runs into the same problem.
I have a virtual environment with two machines, one is a KDC and one is just a WebLogic server. I setup WebLogic to do Kerberos, following the directions in the the documentation and could not figure out what I was doing wrong.
Whenever I accessed WebLogic I kept seeing the header "Authorization: Negotiate TlRMTVNTUAAB..." with only a short string as the token. If you base64 decode that string you see that it starts with NTLMSSP. In other words most definitely NOT a Kerberos token.
It looks like IE6 and IE 8 on Windows 2003 figures out that it's talking to the local machine (i.e. localhost) even if you use the fully qualified domain name!
So if you're trying to get Kerberos working make sure you use a web browser on a different machine. Or just use Firefox instead.