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It sounds like you've set your authentication settings incorrectly on your IIS server. Since you have OWA on a separate IIS server in your DMZ, you won't be able to use either NTLM or Challenge/Response authentication. Neither of these credentials can be passed through multiple hops. I suspect that one of these options (NTLM or Challenge/Response) is set, which would cause authentication to fail and explain the behavior you're seeing.
I would try setting the authentication on the OWA site in IIS to permit only basic authentication. This will prompt your users to authenticate using the appropriate domain, user and password information. They should be using their domain credentials and there should be no requirement for you to create local accounts on the OWA server.
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