Its not really working for me this way. I have added the site to my list of 'Local intranet' sites, created a user in Alfresco which has my Windows username but a different password. Then when I try to access the Alfresco web client, when the Window for credentials pops up asking me for my username and password, it only accepts the password that I set when I created the user, and not my normal Windows password. It bypasses the Alfresco login page and takes me to my dashboard.
Technically single sign-on is working this way, but its just not using the Windows credentials. Unless Im missing something else here. Where does the 'cached password hash' come into this?