well if the folder is in your web root, or same folder as your files or underneath you're probably fine for permissions. if not, you can check it by going to the security tab in that folders properties and make sure there is either an 'Everyone' or IUSR_#machinename# and that one of them has read access. Other than that I'm not sure what would be causing that error, i used crystal with CF5 and an older version of crystal reports and have long since abandoned it.
I've heard that you can CFLOCATION directly to the report file and it will open, but I have not tested that theory.