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Error: Access is denied due to an ACL set on the requested resource

I'm trying to configure an asp.net application on my localhost.  I created the virtual directory and when I browser the page, I get the following error:

HTTP Error 401.3 - Unauthorized: Access is denied due to an ACL set on the requested resource.

This appears to be a permission issue on the folder, but when I try to right click on the site name and select permissions, nothing comes up.  Shouldn't a permissions dialog box come up, where I can set permissions?

I'm running XP Professional x64.

Any help is appreciated.
Thanks.
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ASKER

I read the articles in the above post and found that I needed to uncheck 'simple file sharing', which then allowed me to set permissions on the folder.

I added the IUSR_<MachineName> account with Read & Execute permissions.

Now, when I browse the site, I get this error message:

The XML page cannot be displayed
Cannot view XML input using XSL style sheet. Please correct the error and then click the Refresh button, or try again later.


--------------------------------------------------------------------------------

A name was started with an invalid character. Error processing resource 'http://localhost/CompassLearningDev/'. Line 1, Po...

<%@ Page
-^

If I go into the ASP.NET tab under properties and set the asp.net version to 2.0.50727 and make the documents tab is set to the correct start page...i.e. default.aspx and then browse to the page, I get 'Page Unavailable'.  And I know for sure the page is there.

Not sure what the problem is now?