I have noticed the credentials error if you try to upload after a postback. Make sure you are dealing with a fresh page load.
From the 'Media object storage' section of the Admin Guide:
Quote:Attention: Note that the IIS application pool identity must have modify permission to this location. If specifying a UNC share, it must also have file share permission. The default user (Network Service in IIS 7 and IIS AppPool\DefaultAppPool in IIS 7.5) does not have network permissions and cannot access remote directories. Specify another user for the application pool identity, and – on the network device - ensure that this user has the required file and share permissions.
I don't know enough about your network configuration to know if you can demo the full functionality locally.
Roger Martin
Creator and Lead Developer of Gallery Server Pro