I can't tell what the problem is, but here are some ideas to troubleshoot:

1. What exactly is timing out? Off the top of my head there are several very different possibilities that could all be described as a generic timeout:
   1. The browser giving up on the tcp connection.
   2. ASP.Net erroring out the page execution because it took too long.
   3. The connection from web client to LFS, and web client gave up waiting.
2. Is it most users or most machines? That is, does it really appear to depend on what credentials the user enters or is it more about where they are connecting from?
   1. It sounds like you pursued this one, but to clarify: From a given machine, user X can log in but user Y cannot?
3. How are users logging in? Are the successful users authenticating in the same way as the unsuccessful ones? E.g. they are all LFDS/repository/Windows users?
   1. Does the error occur while literally logging in? That is, can everybody get to the login dialog? And then some can proceed, or are some users unable to get to the login dialog at all?
4. What is different between a user who can log in and one who cannot?
5. What is recorded in the event log on the web client machine?