Dodgefate, I reset the read-only attribute on all files and folders in the website root but it made no difference.

Adnan, no I am still working on this.  Yesterday I did a clean install on a different server that runs Windows Server 2008 R2 and the site runs fine.  I believe it either the difference between 2008 and  2008 R2 or something on the server itself.  I will be working on this some more today.

I think its the order in which you set up the sites directory within windows 2008 r2. Here is what i did to make sure i had a successful install of 7.2.1.

1. Go to Properties of the install zip file and "Unblock" it. Then Unzip the DNN install to a separate folder on the server.

2. Create new directory for your IIS website.

3. Add the "Network Service" account on the new directory to have Full Permissions.

4. Copy the install files into the new directory for IIS.

5. Create New Website in IIS, but remember to uncheck the "Start Immediatly" box. This way the site doesnt fire up and you can configure your app pool.

6. Configure your App Pool to be .net 4.0, Integrated Security and make sure NetworkService is your App Pool Identity (in advanced settings).

7. Recycle your App Pool.

8. Start your Website.

9. Browse to your Website.

10. Follow Wizard to Install.

If you set the site security after you create the IIS website, then your permissions will not get set on all of the files within DNN causing the issue.