Normally in the past, I've managed that the production server only serves http(s) to the internet, and is isolated from it's database by a firewall which only allows database queries to travel. However, I have a situation where a bunch of workers using MS office manipulate files living on a domain. These files also need to be served to customers, so I was thinking that the webserver could have domain privileges such that it could access the folders with those files and only those folders. Obviously this means that the filewall separating the webserver from the domain would need to allow a bunch of ports, for being authenticated to the domain, file sharing, etc. How unsafe is this? Any advice on how to make it better? It'd be IIS 7.5 running on 2008.
This generally isn't much of a problem. Lots of people need to do this. There is a good discussion on the IIS forums here: http://forums.iis.net/t/1175096.aspx
There is also a good high level overview on TechNet: http://technet.microsoft.com/en-us/library/cc731278(WS.10).aspx
And the ports required for Windows Auth: http://support.microsoft.com/kb/832017
I suggest an audit of this IIS server be done with the Microsoft TCM Spider tool. I believe that Coalfire Systems has a contract to provide this service with the Microsoft ACE team.
It also depends on what else runs on the IIS server. For example, MySQL (not normally installed in a Windows environment, but it's good to specify these things) will run under the SYSTEM account. If it becomes compromised through a SQL injection, then it is likely that all accounts, including domain accounts, will be compromised.
However, the situation doesn't differ much if MS-SQL is installed, although recent version of MS-SQL are at least run with lower privileges.