DNN 5.1.4 Install Failing on WinSrv2008 R2 x64, IIS 7 and SQL 2008 sp1

tm3
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Environment: Window Server 2008 R2 x64, IIS7, SQL 2008 SP1
Reference Instructions:

I used the following two site for guidance.
"      http://www.adefwebserver.com/DotNetNukeHELP/DNN4_DevelopmentEnvironment/DNNDevelopmentWindowsVista.htm
"      http://learn.iis.net/page.aspx/624/application-pool-identities/


Steps Followed:
1.      Create Database  DotNetNuke
2.      Create User Account  NukeAdmin
3.      Add NukeAdmin User Account to DotNetNuke DB as owner
4.      Create folder and extract Install 5.1.4  NukeFolder
5.      Add Default Application Pool identity to wwwroot folder with full rights&see http://learn.iis.net/page.aspx/624/application-pool-identities/
6.      Edit web.config with SQL connection string  see http://www.adefwebserver.com/DotNetNukeHELP/DNN4_DevelopmentEnvironment/DNNDevelopmentWindowsVista.htm
7.      Create Application in Default Web site  pointing to NukeFolder with an alias of wwwNuke using the DefaultAppPool  identity
8.      Browse to localhost/wwwNuke

And here is where the problem begins. I get the following error.

Server Error in '/wwwNuke' Application.
________________________________________
Security Exception
Description: The application attempted to perform an operation not allowed by the security policy.  To grant this application the required permission please contact your system administrator or change the application's trust level in the configuration file.

Exception Details: System.Security.SecurityException: Request for the permission of type 'System.Web.AspNetHostingPermission, System, Version=2.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089' failed.

Source Error:
An unhandled exception was generated during the execution of the current web request. Information regarding the origin and location of the exception can be identified using the exception stack trace below.

Stack Trace:

[SecurityException: Request for the permission of type 'System.Web.AspNetHostingPermission, System, Version=2.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089' failed.]
   System.RuntimeTypeHandle._GetTypeByName(String name, Boolean throwOnError, Boolean ignoreCase, Boolean reflectionOnly, StackCrawlMark& stackMark, Boolean loadTypeFromPartialName) +0
   System.RuntimeTypeHandle.GetTypeByName(String name, Boolean throwOnError, Boolean ignoreCase, Boolean reflectionOnly, StackCrawlMark& stackMark) +62
   System.RuntimeType.PrivateGetType(String typeName, Boolean throwOnError, Boolean ignoreCase, Boolean reflectionOnly, StackCrawlMark& stackMark) +42
   System.Type.GetType(String typeName, Boolean throwOnError, Boolean ignoreCase) +77
   System.Web.Compilation.BuildManager.GetType(String typeName, Boolean throwOnError, Boolean ignoreCase) +105
   System.Web.Configuration.ConfigUtil.GetType(String typeName, String propertyName, ConfigurationElement configElement, XmlNode node, Boolean checkAptcaBit


I have tried this twice. Once on a server I didn't build and again on a fresh install I did myself. SQL is in Mixed mode and the userid and password has been confirmed to work via an ODBC connection from another machine.  Where did I go wrong or whats so new in IIS 7/SQL2008 that needs to be tweaked?

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Check to see that the website is set as an application.
BTW - The easiest way to install and configure web aplications like this is using the Microsoft web platform installer. That will install version 4.8 (last time I did it) - but it is an easy upgrade to version 5. The wizard lets you create a new site, or add to the current defautl site as you are doing above.
http://www.microsoft.com/web/
 
Commented:
It is set as an application.  Found a work around/solution.  It turns out the DNN 5.1.4 is still running under DotNet 2.  It requires the Classic .Net AppPool and it does not support the new ApplicationPoolIdentity feature in IIS 7.  Therefore the solution is to set it up with the Classic .Net AppPool  application pool and change the identity of the pool to Network Service from ApplicationPoolIdentity, add Network Serivice to the DNN folder with full rights and up it comes.

I understand that DNN 5.2 has been re-written to support .Net 3 and will therefore work with the new features in IIS 7 on Windows 2008 R2 Server.

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