I had a similar problem, but was able to get it going by going into IIS and accessing the properties of the default website. Selected the home directory tab, clicked the configuration button and selected the options tab. There I checked the "enable parent paths" box and applied. That enabled me to get to the login page.
Then I had to "allow" everything on the web services extensions snap-in to be able to get past the login screen. It probably would have been easier to follow janaya's suggestion.
Could you guys take a look at my earlier post thread798-1330364 to see if you have any ideas? I'm having trouble adding 3 digit DNs...thanks