Well, at this point I am going going to take this back to square one, and document the process in case anyone else has the same problem.
I have a clean installation of Server 2008 R2 with Sql Server 2008r2
I created the directory c:\websites\iconintranet and copied the DNN 5.6 installtion files to it
In IIS (7.5) I created an "iconintranet" site under the sites tab, and assigned it to the default app pool, integrated pipeline, .NET framework 2.0
I added a line to my hosts file so iconintranet will go to the proper site.
I have given full control to the c:\websites\iconintranet directory to the following users:
Network Service
IIS IUsers
IIS AppPool
IUSR
(I realize full rights are overkill at this point, but I'm just trying to get it to work)
When I type http:\\iconintranet in IE on the webserver I get a DotNetNuke configuration error page from the installWizard.aspx page.
It says that access to the page "c:\websites\iconintranet\web.config' is denied. The file does exist, so it must be a rights issue - but I don't know which user I am missing...
If I create the site as an app under Default Web Site rather than its own site it works - but I have to access the site with the url:
http://mnintranet/mnintrnet - which seems kind of redundant. Is that the way it is supposed to be?