Editor's note: Doing what this answer says is DANGEROUS! The LocalSystem account is a ...
Completely trusted account, more so than the administrator account. There is nothing on a single box that this account cannot do, and it has the right to access the network as the machine (this requires Active Directory and granting the machine account permissions to something)
Changing the Identity from ApplicationPoolIdentity to LocalSystem did the work ;).
I am using win7 64 with IIS 7.5
more about Application Pool Identity in IIS 7.5 and win 7
