We are using 2.6 and have set up a WebDav repository instance (much thanks for the forums that recommended this to match our workflow from 1.9 https://moodle.org/mod/forum/discuss.php?d=262556#p1143035). Now that I am testing this I feel like I am missing something regarding permissions.
The webdav documentation states that "This repository is accessible by default to administrators, course creators, teachers, editing teachers and managers, but not to guests or students. Thiscapabilitycan be changed to control access to users with specific roles."
Our workflow is such that we would upload all the files outside of moodle and link to those files within the moodle resources. We can do that, but then when logged in as a student the student cannot view it without being prompted to enter the credentials for the WebDav repository.
I assumed (perhaps incorrectly) that any user with permission to upload to the webdav repository would be allowed to do so, but any user (ie students) would be able to view the image that was being called from the webdav. So for example, a teacher creates a page resource, links to an image file in the repository, saves the page. The student would access the course, click on the page resource and would see the image the teacher had placed there. Again, now the student is being asked to enter the webdav credentials when they click the page resource.
Second, it seems strange that each time a user (who has permission to access the webdav) upload to that repository, they are asked for the credentials again, each time they try to contribute to the repository. I assumed by setting up the repository in the admin the credentials were exchanged and moodle handled the permission question.
Hope this all makes sense--happy to answer any questions where I may not have been clear.