The keyfile needs to be installed into the users machine / user account.
Take a look at the following to understand how to install the digital certificate...
See step 3...
http://msdn.microsoft.com/en-us/library/ff649247.aspx
Step 3. Request and Install a Client Certificate
This procedure installs a client-side certificate. You can use a certificate from any certificate authority, or you can generate your own certificate using Microsoft Certificate Services as described in the following sections.
This procedure assumes that Microsoft Certificate Services is configured for pending requests, which require an administrator to explicitly issue the certificate. It can also be configured to automatically issue certificates in response to certificate requests.
To check the certificate request status setting
On the Microsoft Certificate Services computer, select Certification Authority from the Administrative Tools programs group.
Expand Certification Authority (Local), right-click the certification authority and click Properties.
Click the Policy Module tab, and then click Configure.
Check the default action.
The following procedure assumes that Set the certificate request status to pending. Administrator must explicitly issue the certificate is selected.
To request a client-side certificate
Start Internet Explorer and navigate to http:// hostname/certsrv, where hostname is the name of the computer on which Microsoft Certificate Services is installed.
Click Request a certificate, and then click Next.
On the Choose Request Type page, click User Certificate, and then click Next.
Click Submit to complete the request.
Close Internet Explorer.
To issue the client-side certificate
From the Administrative Tools program group, start the Certification Authority tool.
Expand your certificate authority, and then select the Pending Requests folder.
Select the certificate request you just submitted, point to All Tasks on the Action menu, and then click Issue.
Confirm that the certificate is displayed in the Issued Certificates folder, and then double-click it to view it.
On the Details tab, click Copy to File to save the certificate as a Base-64 encoded X.509 certificate.
Close the properties window for the certificate.
Close the Certification Authority tool.
To install the client-side certificate
To view the certificate, start Windows Explorer, navigate to the .cer file saved in the previous procedure, and then double-click it.
Click Install Certificate, and then click Next on the first page of the Certificate Import Wizard.
Select Automatically select the certificate store based on the type of certificate, and then click Next.
Click Finish to complete the wizard. Dismiss the confirmation message box, and then click OK to close the certificate.
Step 4. Verify Client Certificate Operation
This procedure verifies that you can access the SecureApp application using a client certificate.
To verify client certificate operation
Start Internet Explorer and navigate to http s://localhost/secureapp/webform1.aspx.
Confirm that the Web page displays successfully.