When you install IIS AFTER .NET 2.0 framework, the rights of the ASPNET user had not been set correctly.
Repair (Uninstall if repair does not work for you) .NET Framework 2.0
Simply run the following from command line to reset the IIS registry settings for aspnet user. Usually framework directory for .Net Framework 2.0 resides under C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727
Run the following command
Version: ASP NET 2.0, IIS5, Windows XP Sp3