Should I remove this question? I figured out what the issue was and it wasn't IIS... See my answer below for the outcome.
Original Question I'm working on an ASP.Net MVC app and run in to a weird issue with URL Rewrite redirects and AJAX requests.
I've added the following rewrite rule to my Web.config in the root site.
<rewrite>
    <rules>
        <rule name="Account" stopProcessing="true">
            <match url="^SubApp/Account/(.*)$" />
            <action type="Redirect" url="Account/{R:1}" redirectType="Found" />
        </rule>
    </rules>
</rewrite>
Everything seems to work ok if I use a Permanent or Temporary redirectType in the config but fails with a HTTP Error 401.0 - Unauthorized IIS error page .
When I make an normal GET request via the browser to an action that would trigger this rule e.g. https://some-site/SubApp/Account/Settings then I get a 302 Found and the location header is set to the expected URL https://some-site/Account/Settings and the appropriate page is rendered. 
However when I make a GET request via JQuery's AJAX i.e. $.get('https://some-site/SubApp/Account/Settings') the returned Response status code is 401 Unauthorized but it still has the appropriate location header. 
The content of the response is a standard IIS HTTP Error 401.0 - Unauthorized error page.
Weirdly everything seems to work ok if I use either the Permanent or Temporary redirect types in the config but fails only with Found.
/SubApp is a separate application that sits below the root site at /.
What's going on?
Screenshots
redirectType="Permanent"

redirectType="Found"

redirectType="Temporary"

As you can see from the screenshots the only difference is the redirectType specified in the Web.config.
As you can see the redirects are happening as expected with exception to the Found redirect type which I would expect to get a 302 - Found response redirecting to the same URL as the others.
 
     
    