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Strange 301 behavior on IIS7

I am seeing a strange 301 behavior where the following occurs:

 

A link to a valid location, "http://www.mydomain.com/subdir1" yields a HTTP 301 and becomes "http://www.mydomain.com/mydomain/subdir1/" and then displays the index.html for that location. So the page is displayed, but showing a wrong URL.  If I enter "http://www.mydomain.com/subdir1/" then it works correctly (shows the same index.html page, but also shows the correct URL).  The site is using HTML only for these pages, but is an ASP.Net site hosted on IIS7.  Any suggestions on how to fix this erroneous 301?