You can configure the permission level of anonymous users to allow for viewing versions of documents and items, but no matter what you do, they get prompted for credentials.
The Version History page has the property “AllowAnonymousAccess” set to false. It is a virtual property in the Microsoft.SharePoint.ApplicationPages.UnsecuredLayoutsPageBase class that needs to be overridden in those layout pages that should be visible for anonymous users.
SharePoint 2007
The solution is an identical copy of the original Version History page of SharePoint 2007 but with the aforementioned property set to true.
The farm solution contains the page and a Site Collection Feature for activation which will add links to the page in the Toolbar and ECB menu for Document Libraries and Lists. You could hide or replace the link to the original page, but that isn’t straight-forward using CustomAction elements.
Installation and activation
Download from here (Ventigrate Codeplex Repository)
Deploy the WSP (farm solution) to the SharePoint Farm
STSADM -o addsolution -filename Ventigrate.Shared.AnonymousVersionHistory.wsp
STSADM -o deploysolution -name Ventigrate.Shared.AnonymousVersionHistory.wsp -allowgacdeployment -immediate
Activate the Site Collection Feature where you want this functionality
SharePoint 2010
SharePoint 2010 suffers from the same issue. You need to adapt the above solution to make it work for SharePoint 2010
- Copy the markup of the SharePoint 2010 Version History page (and add the property override)
- Adapt the CustomAction elements to add links to UI elements for SharePoint 2010 (and optional Dialog UI)