Hi Everyone,
I have the same problem as described above.  I verified the settings mentioned above and still get the error 404.  I've got a similiar configuration to the OP, but I'm using SQL 2005 Express.  When I right click default.aspx above and click 'browse' I just get the 404 error. This has got to be a server config issue with IIS. If I rename default.aspx to default.asp, I can browse the file and immediately get a ASP 0221 error.  The Web server sees the file, but immediately errors out.  Any ideas?  I'm pretty sure this is something fairly simple, yet the answer escapes me.

I've found the answer. I did a forum search and found several people with the same issue.  As expected.  It's not DotNetNuke, but a IIS config problem.  We really need to put this into the install docs as it's a default config for a lot of people.  So the permissions on the directories were just fine, but ASP v2.0 itself was being blocked. by IIS.  Here are some instructions to fix:

1. Open the IIS6 Manager
2. In the left-hand pane, click on Web Services Extensions
3. Notice that there is a Web Services Extension for ASP v1.1, *but not for 2.0*.  This is the problem.
4. In the right hand pane, click on "Add a new Web service extension"
5. Under Extension Name, call it ASP.NET v2.0
6. Under Required Files, click 'add' and, assuming you have a default windows install, type in c:\windows\microsoft.net\framework\v2.0.50727\aspnet_isapi.dll
6. Click OK
7. Enable the checkbox that says "Set extension status to Allowed"

Viola!  Now all you have to do is get around the infamous "can't find DotNetNuke_template.mdf" problem and you'll be up and running with a new portal website.

I'm playing with it now.  It's very nice, much better than Mwpx and Max Web Portal.  Great job and thanks for making this software!

Definitely not set up properly - I've not had to do this on a Win2k3 before.  The only server I've ever had issues on was an older Dev box that I was learning dotnet 1.1 on.  Just had to install .net 2.0 and change the defaultapppool (actually added a new one to run beside 1.1). 

It could be as simple as the install order that Toby mentioned.