I have the same setup that you do, and this works fine for me. I think that maybe the problem lies somewhere on your moss configuration or on your network.
You said that moss resides on the same domain as your application. If you have access to the site with your user (that is logged into your machine)... have you tried:
client.ClientCredentials.Windows.ClientCredential = System.Net.CredentialCache.DefaultNetworkCredentials;