I had the same problem. Here’s how I solved it.
In IIS7, click on your website, then double-click the Authentication button.
Click on Anonymous Authentication, then click the Edit… link on the right hand side.
Make sure the “Application pool identity” checkbox is checked.
My application pool is running under the “Network Service” user (not “ApplicationPoolIdentity”). You can choose the Identity in the Advanced Settings of your application pool in IIS. This user has been given full access to the file system for the website.