Web server reported following error... HTTP/1.1 500 Internal Server Error

My server is running Windows 2003. ASP.NET 1.1 is installed and seems to be
working fine but when I try to create a project from VS.NET 2003 I get the
"Web server reported following error... HTTP/1.1 500 Internal Server Error"
message.

I have already read a bunch of posts from others saying to run
aspnet_regiis.exe -i and the like but none of this has worked. Here's what I
have found:

BTW: Each website has its own IUSR account associated with it (i.e.
IUSR_websitename). This may or may not be relevant.

If I run FileMon while I try to create the project, I see that w3wp.exe
tries to access the root directory of the web as follows:

OPEN c:\Domains\website.com - SUCCESS

Then a few lines later I see this:

OPEN c:\Domains\website.com\ - ACCESS DENIED

Note the only difference is the slash. I have made the ASPNET worker process
part of the admin group for the sake of argument but still get the same
results.

Any help is appreciated.I found that if I go to IIS

IIS->Application Pools->DefaultAppPool

which is the app pool my app is sitting in, and change the identity from
Network Service to Local Service, I am able to create my app. However, I
would like to know how to fix this problem without compromising the security
of my server.

Thanks
I ran into the same problem a few weeks ago. Nothing seemed to work
for me, but I finally deleted the ASPNET account using Computer
Management and went through the steps listed here:

http://support.microsoft.com/?id=306005

I hope this helps.

Amaryllis