Resolution: This is a known bug with Microsoft ASP .NET. One work around for this is to set the userName attribute to SYSTEM in the <processModel> section of the Machine.config file. The Machine.config file can be edited with notepad and by default will be located in the following directory "C:\WINDOWS\Microsoft.NET\Framework\v1.0.3705\CONFIG"
(Please note that this directory may change depending upon the version and installation location of the Microsoft .NET Framework.)
However, if you require a more secure means of resolving this issue please read the following Microsoft Knowledge Base article.
Knowledge Base Article Q315158 - ASP.NET Does Not Work with the Default ASPNET Account on a Domain Controller
http://support.microsoft.com/default.aspx?scid=kb;en-us;Q315158