This is something that took me quite awhile to figure out and implement. I decided to do this right from the start as I was building and implementing MOSS 2007. It is better to deal with this at the start then later on as you may encounter more headaches, and also you don't pose the risk of running into problems where there will be downtime for users.
Get it all done before you roll it out. I used two sources that helped me out a bit on how to properly implement Kerberos into MOSS 2007.
Microsoft SharePoint: Building Office 2007 Solutions in C# 2005
Author: Scot Hillier