D'uh... thanks - I can't believe I forgot this step somehow. I think it is because I normally use Web Application Projects, which let you set up the IIS 5.1 virtual folder and all the permissions with one click. Just a simple folder-based web site project does not work the same.
Note: I'm not sure you want to grant "Write" access to the entire directory -- just files or folders that ASP.NET will have to write to. Otherwise "REad" and "Execute" would be fine.
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