I recently upgraded our Synology NAS Firmware to DSM 4.0 and found that our Windows XP workstations would no longer connect. After investigation it appears that the Samba server
settings in the new firmware has been changed to no longer permit authentication via NTLM,
only NTLMv2 and newer methods.
To fix this in your Windows XP Pro workstation perform the following steps.
1. Click on the Start Button and key in secpol.msc in the search box and hit Enter.
2. When the Local Security Policy editor has loaded, expand Local Policies and select Security Options.
3. Scroll through the list and locate "Network Security: LAN Manager authentication level." Right click on this setting and select Properties.
4. Change the setting to "Send LM & NTLM - use NTLMv2 session security if negotiated"
5. Hit OK and then reboot the Windows XP computer
Your NAS will be accessible again in Windows XP.
P.S. Can you guys at Synology add an option in the firmware (Control Panel -> Win/Mac/NFS -> Windows File Service) to allow the turning on of NTLM compatibility at the server end.