401 Client ‘Negotiate’, Server ‘Negotiate,NTLM’ When Calling WCF Server to Server

Ok, I’ve read every thread & question I can find with this error and surprisingly have not found a solution. I’m trying to require Windows authentication on my IIS hosted WCF service (.NET 4.0) which, until now, has been optional. I have had a Windows authentication enabled endpoint available on the server for a while with several remote applications successfully using it. I’m now trying to switch our web applications and other server apps that use the WCF service over to this secured endpoint by giving them the exact same client configuration as the working remote clients, but the server apps are receiving a 401 with the message:

The configuration section ‘system.servicemodel’ cannot be read because it is missing a section declaration

I have somewhat of a problem.
My old webserver (windows 2003) have been replaced, with a 2008 R2. I have been given an admin account on it, and can do whatever I want, but I am no expert on this area.
I configured the roles to have application developement and Web server (iis7).