After lot's of digging and reading various posts such as JBoss Wiki: NegotiateKerberos and some discussions that took place on this forum (http://www.jboss.org/?module=bb&op=viewtopic&t=102042).
I've decided to create a little sand-box example that would work as single sign on on windows domain and would be a part of Seam security framework.
After I managed to have such example working I've posted a blog article explaining what needs to be done and giving a 'one page view' on how to enable auto-login in combination with single sign on: http://sdudzin.blogspot.com/2007/12/windows-sso-with-jboss-seam.html
Hope this info will be helpful.
Btw, this can be extended to make it an integral part of Seam framework.