I had the same issue.. Ran 5 or 6 hours of researches.. Simple solution seems to be working.. I just had to convert my folder to application from iis.. It worked fine. (this was a scenario where I had did a migration from server 2003 to server 2008 R2)
(1) Open IIS and select the website and the appropriate folder that needs to be converted. Right click and select convert to Application. It is here.. http://www.windowstechinfo.com/2014/09/solved-an-error-occurred-during.html