Odd Security issue on Windows 2008 Server running IIS 7.0

To be honest, I can't make sense of this error or it's resolution. However, I wanted to write it down incase we ever run across it again.

My project team has the first Windows 2008 servers in the data center. This means that if something goes wrong, everyone gets to stair back at us saying "why in the heck did you guys adopt this new OS so fast." And true to form, something did go wrong. We started getting the error "The server encountered an error processing the request. The exception message is 'Access is denied.'" when performing some actions (of which I'm not 100% sure as another sub-group wrote the code) in a Web Service running under IIS 7.0.

We knew this had to be some kind if security issue so we went through the standard steps. Oddly enough, our Data Center contact (who is a Microsoft Wizard) stumbled on a resolution where he added "Network Service" to the local Administrators group (this was a last resort). As we kind of expected, this resolved the error. He then removed "Network Service," as having it in the local Administrator group would be stupid, and rebooted. We expected the error to come back. Nope, that seemed to fix "it." We repeated this on one other machine and magically it fixed it as well.

We're not sure why this works. We continue to laugh about it and just hang our heads low.

The server encountered an error processing the request. The exception message is 'Access
is denied.'. See server logs for more details. The exception stack trace is:
at System.ServiceModel.Dispatcher.SyncMethodInvoker.Invoke(Object instance, Object
[] inputs, Object[]& outputs)
at System.ServiceModel.Dispatcher.DispatchOperationRuntime.InvokeBegin(MessageRpc& rpc)
at System.ServiceModel.Dispatcher.ImmutableDispatchRuntime.ProcessMessage5(MessageRpc& rpc)
at System.ServiceModel.Dispatcher.ImmutableDispatchRuntime.ProcessMessage4(MessageRpc& rpc)
at System.ServiceModel.Dispatcher.ImmutableDispatchRuntime.ProcessMessage3(MessageRpc& rpc)
at System.ServiceModel.Dispatcher.ImmutableDispatchRuntime.ProcessMessage2(MessageRpc& rpc)
at System.ServiceModel.Dispatcher.ImmutableDispatchRuntime.ProcessMessage1(MessageRpc& rpc)
at System.ServiceModel.Dispatcher.MessageRpc.Process(Boolean isOperationContextSet)