NT AUTHORITY\NETWORK SERVICE is the default identity for the defaul application pool in Windows 2003.  It should have rights to D:\Inetpub\users\DNN, by default, via the Users group or Everyone group.  Additionally, by default, it is a member of the IIS_WPG group.  You can also try creating a separate application pool in IIS Manager for DNN, and assign it a different windows account.  Give that Windows accounts rights to the folder and assign it to the IIS_WPG group.

The next error is also possibly a connection string issue as another poster mentioned.  Are you using SQL Server Express 2005? 

If so, try a different connectiong string.  The default connectiong string that the installer ships with uses the new attachdbfilename property which requires the database be located in ..\app_data or something like that...changeable of course.

http://msdn2.microsoft.com/en-us/library/ms228037.aspx