WorkSpace and IIS Windows Authentication

Hi all,
We're in the process of implementing our Client based software on AWS WorkSpace.
Our software configuration is pretty simple, one Application server and several Clients that connect to it using TCP protocol.
I've used 2 separate WorkSpaces, one for the Application Server (that also has IIS installed via Windows Features), and one WorkSpace with our Client. We're also using simple AD (Amazon quick setup simple AD).
After installing all the components and making sure that everything is working with internal users I've tried to use our Active Directory authentication option - I've added the Windows Authentication option under the IIS feature and verified that the Windows Authentication Providers under our realm is configured for Negotiate and NTLM (Negotiate first). Then I've tried to run a connection test to the application pool and I've got the followin message:
"Application Server path is invalid
The HTTP request is unauthorized with client authentication scheme 'Negotiate'. The authentication header received from the server was 'Negotiate,NTLM'."
After spending two days on google to try to figure out what the issue is I've tried to replace the Application Server hostname with the IP and then the Application Server test worked ok - but now we're facing different errors on our software login side.
I've asked our R&D how the Application Server authentication worked and they told me that the software uses WindowsIdentity.GetCurrent().Name to get the username and the password field equals "not relevant".
Since the AD authentication works perfectly well outside AWS, I'm trying to understand what's different on AWS regarding AD authentication.
Any assistance will be highly appreciated as I'm getting frustrated over here.
Thanks and stay safe.

Edited by: lirant on Mar 4, 2021 2:55 AM