Hello ErikVB,
Many thanks for your post - it (indirectly) led me to the resolution of the failed installation issue I was experiencing. And thanks to the other responders - you were all correct in identifying that the problem had to be permissions - it was just that the resolution turned out to be a bit off the beaten path.
Yes - server is running Plesk - Control Panel v8.6. I have RDP access. I had manually set the folder security permissions to full control for both Network Service and ASPNET so, regardless of what Plesk allowed - it was there.
However, ErikVB's identification of Plesk as the potential culprit got me to thinking. I plowed into IIS Manager and started poking around. I pulled up the default pool and Network Service was there in the Identity tab. My target domain was not. Instead, it was located in a pool named plesk (default)(2.0)(pool), along with most of my domains and client domains, because (as I now realized) that is where Plesk inserts domains that have ASP.NET v2.0.50727 turned on.
Right clicking on that application pool in IIS Manager, bringing up the pool properties window, identity tab showed me that the default predefined security account Network Service was NOT BEING USED!!!!! Instead, the security account is defined as IWAM_plesk(default). At this point, even my dim little light bulb began to glow.
So I gave that account full control of root on down - and voila - successful initial install completed. Now I can start figuring out how to work with dnn and what all it does.
For the sake of anyone with a similar issue, I'll recap the steps to check and resolve this particular issue. The root cause of the installation breaking - Plesk (with ASP v2.0.50727 enabled) does not use the default security account Network Service. It substitutes IWAM_plesk(default).
To verify what has been configured as the security account - open IIS manager, locate the application pool that your target domain is in, right click on the application pool name, select properties from the context menu, then select the identity tab in the application properties dialog form. The identity form will either have the predefined account selected (normally Network Service) or the configurable box button will be selected and a custom security account name will be showing. In the case of this version of Plesk w/ASP v2.0.50727 enabled, that security account is IWAM_plesk(default).
The resolution is to give THE CONFIGURABLE security account read, write, modify permissions to root (letting child folders inherit these permissions.)
For this specific combination of operating system and control panel (Windows 2003 R2 Std, IIS v6.0, Plesk v8.6 - the security user name when using WIndows Explorer, navigate to \inetpub\vhost\[YourDomainName]\httpdocs - right click on httpdocs, select Sharing and Security from the context menu, select the Security tab from the httpdocs properties form, click the Add button, the name to insert is the one identified in IIS Manager, however it may not 'look' quite the same in this view, as it did from within IIS Manager - in my case the security name to add read, write, modify permissions to, shows up as Plesk IIS WP User ([YourServerNameHere]\IWAM_plesk(default)).
Regards,
Gordon