SQL Server 2005 - Integrated security

I am developing a .Net app that accesses data from SQL Server 2005. this app will be hosted on IIS 7.0 websrever.
I want to use integrated security for data access. Here is what I tried in my web.config file, which works fine when I launch my app from within Visual Studio 2008, but when I launch it from the server (with IIS 7 web server), it gives me error.
<add key="DatabaseString" value="Driver={SQL Server};Server=CDYMGR;Database=HVDMG;Integrated Security=true" />
OR
<add key="ConnectionString" value="Data Source=CDYMGR;Initial Catalog=HVDMG;Integrated Security=true" />

Error: System.Data.SqlClient.SqlException: Login failed for user 'MSA\HVAULT$'.

What setup do I have to do in IIS or SQL Server or network/ active directory settings to let my app get database access from the server?

Thanks.

a number of checks you can do

check that the SQL Server suface area services and config settings are done, i.e. remote connection is enabled

also that you have configured the logon security settings to connect to the SQL Server and also set the access rights to the database.

The reason it's probably working in VS 2008 is your the local admin of that machine and if your sql server is also on it your probably connecting as the dbo which has the rights