IIS7 folder permissions for web application

http://forums.iis.net/t/1187650.aspx has the answer. Setting the iis authentication to appliction pool identity will resolve this.

In IIS Authentication, Anonymous Authentication was set to "Specific User". When I changed it to Application Pool, I can access the site.

To set, click on your website in IIS and double-click "Authentication". Right-click on "Anonymous Authentication" and click "Edit..." option. Switch from "Specific User" to "Application pool identity". Now you should be able to set file and folder permissions using the IIS AppPool\{Your App Pool Name}.

Running IIS 7.5, I had luck adding permissions for the local computer user IUSR. The app pool user didn't work.

If it's any help to anyone, give permission to "IIS_IUSRS" group.

Note that if you can't find "IIS_IUSRS", try prepending it with your server's name, like "MySexyServer\IIS_IUSRS".

In IIS 7 (not IIS 7.5), sites access files and folders based on the account set on the application pool for the site. By default, in IIS7, this account is NETWORK SERVICE.

Specify an Identity for an Application Pool (IIS 7)

In IIS 7.5 (Windows 2008 R2 and Windows 7), the application pools run under the ApplicationPoolIdentity which is created when the application pool starts. If you want to set ACLS for this account, you need to choose IIS AppPool\<yourpoolname> instead of NT Authority\Network Service.