Are you connecting to SQLServer for spatial data or are you using the ODBC provider to get attribute data?
I don't believe it will be possible to use Windows Authentication using the Spatial provider because there is no DSN or connection string the user can modify.
Even in the case of ODBC where the user can specifiy to use a Trusted connection or Integrated Security the mgserver.exe service would probably have to run under a network id with privileges against SQLServer for this to work.
I don't believe the current model supports this option.
Regards,
Dave