in principle Test Studio should add a Dialog Handler for you automatically. Occasionally in specific environments Test Studio will fail to do this automatically. That's a bug and the workaround is to simply add a Dialog Handler manually where you need it (i.e. at the point in your test where you know one will need to be handled). Once you've added it, expand it and input userName/password (screenshot 2).
In your ticket I can see it's a standard Windows Security Dialog so Test Studio should definately be able to handle it. Also, could you please provide some details on your environment, I want to try to reproduce this locally.
Let me know how it goes!
the Telerik team
Registration for Q1 2011 What’s New Webinar Week is now open. Mark your calendar for the week starting March 21st and book your seat
for a walk through all the exciting stuff we ship with the new release!