Web Deploy, Management Service Delegation, recycleApp, works with IIS Users but not with Domain Users

Hi

I have successfully setup delegation in IIS 7.5 / Windows 2008R2 for application pool recycling using an IIS user by specifying the username and password on the msdeploy commandline: 

msdeploy.exe -verb:sync -source:recycleApp -dest:recycleApp="My Services",wmsvc=MyHostName,username=recycler,password=******,recycleMode="RecycleAppPool",authType=basic -allowUntrusted

In the delegation rule I have defined  '*' to allow all users to execute this rule. On the site level I have added the appropriate IIS User (recycler) to the IIS Manager Permissions and all is fine.

Then I have added a domain user to the IIS Manager Permissions on site level and was using the following command (logged in as the specified domain user) 

msdeploy.exe -verb:sync -source:recycleApp -dest:recycleApp="My Services",wmsvc=MyHostName,recycleMode="RecycleAppPool",authType=ntlm -allowUntrusted

Now I am getting unauthorized error:

Error Code: ERROR_USER_UNAUTHORIZED

I have restarted wmsvc, etc, but I am not able to find out why this does not work. wmsvc is enable for both local and windows users.

Many thanks