So I went through the wizard and was able to install a new DNN 5.6 site using the DefaultAppPool, setup using Integrated pipleine and Identity of NetworkService and Load User Profile=True.

 I verified that my old DNN 4.5 version sites are also running on the ASP.NET 2.0 platform, so when I tried to setup the DNN 4.5 site with the same settings as above it still fails to load with the following error:

 500 - Internal server error.
There is a problem with the resource you are looking for, and it cannot be displayed.

Event code: 3005 
Event message: An unhandled exception has occurred. 
Event time: 1/21/2011 3:29:53 PM 
Event time (UTC): 1/21/2011 8:29:53 PM 
Event ID: 50902a84736d4646ae57d92073efee05 
Event sequence: 3 
Event occurrence: 1 
Event detail code: 0 
 
Application information: 
    Application domain: /LM/W3SVC/5/ROOT-3-129401153814432988 
    Trust level: Full 
    Application Virtual Path: / 
    Application Path: C:\inetpub\wwwroot\Other\AngelsLandingSC\ 
    Machine name: ABL2 
 
Process information: 
    Process ID: 8528 
    Process name: w3wp.exe 
    Account name: NT AUTHORITY\NETWORK SERVICE 
 
Exception information: 
    Exception type: ArgumentException 
    Exception message: Absolute path information is required. 
 
Request information: 
    Request URL:  
    Request path:  
    User host address:  
    User:  
    Is authenticated: False 
    Authentication Type:  
    Thread account name: NT AUTHORITY\NETWORK SERVICE 
 
Thread information: 
    Thread ID: 18 
    Thread account name: NT AUTHORITY\NETWORK SERVICE 
    Is impersonating: False 
    Stack trace:    at System.Security.Util.StringExpressionSet.CreateListFromExpressions(String[] str, Boolean needFullPath)
   at System.Security.Permissions.FileIOPermission.AddPathList(FileIOPermissionAccess access, AccessControlActions control, String[] pathListOrig, Boolean checkForDuplicates, Boolean needFullPath, Boolean copyPathList)
   at System.Security.Permissions.FileIOPermission..ctor(FileIOPermissionAccess access, String path)
   at System.Web.Caching.CacheDependency.Init(Boolean isPublic, String[] filenamesArg, String[] cachekeysArg, CacheDependency dependency, DateTime utcStart)
   at System.Web.Caching.CacheDependency..ctor(String filename, DateTime start)
   at DotNetNuke.Services.Cache.FileBasedCachingProvider.FBCachingProvider.Insert(String CacheKey, Object objObject, Boolean PersistAppRestart)
   at DotNetNuke.Entities.Host.HostSettings.GetHostSettings()
   at DotNetNuke.Services.Scheduling.SchedulingProvider.get_SchedulerMode()
   at DotNetNuke.Services.Scheduling.DNNScheduling.Scheduler.CoreScheduler.Halt(String SourceOfHalt)
   at DotNetNuke.Services.Scheduling.DNNScheduling.DNNScheduler.Halt(String SourceOfHalt)
   at DotNetNuke.Common.Global.Application_End(Object Sender, EventArgs E)
 
 
Custom event details: 

Just for kicks I copied the root/config/compression.config to the C:\ drive where it was looking for it and got a different error about absolute path:

Server Error in '/' Application.

---

Absolute path information is required.

Description: An unhandled exception occurred during the execution of the current web request. Please review the stack trace for more information about the error and where it originated in the code. 

Exception Details: System.ArgumentException: Absolute path information is required.

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: 

[ArgumentException: Absolute path information is required.] System.Security.Util.StringExpressionSet.CreateListFromExpressions(String[] str, Boolean needFullPath) +10068101 System.Security.Permissions.FileIOPermission.AddPathList(FileIOPermissionAccess access, AccessControlActions control, String[] pathListOrig, Boolean checkForDuplicates, Boolean needFullPath, Boolean copyPathList) +111 System.Security.Permissions.FileIOPermission..ctor(FileIOPermissionAccess access, String path) +90 System.Web.Caching.CacheDependency.Init(Boolean isPublic, String[] filenamesArg, String[] cachekeysArg, CacheDependency dependency, DateTime utcStart) +2878 System.Web.Caching.CacheDependency..ctor(String filename, DateTime start) +126 DotNetNuke.HttpModules.Compression.Settings.GetSettings() +880 DotNetNuke.HttpModules.Compression.CompressionModule.CompressContent(Object sender, EventArgs e) +438 System.Web.SendResponseExecutionStep.System.Web.HttpApplication.IExecutionStep.Execute() +240 System.Web.HttpApplication.ExecuteStep(IExecutionStep step, Boolean& completedSynchronously) +171