"Cannot verify access to path"

Would someone please explain this to me??

Using Win2k8 RC1, in IIS, Default Web Site, Basic Settings, Test Settings:

Cannot verify access to path (C:\inetpub\wwwroot)
The server is configured to use pass-through authentication with a built-in
account to access the specified physical path. However, IIS Manager cannot
verify whether the built-in account has access. Make sure that the
application pool identity has Read access to the physical path. If this
server is joined to a domain, and the application pool identity is
NetworkService or LocalSystem, verify that \$ has
Read access to the physical path. Then test these settings again.

This is a standalone machine. The default web is showing up fine and Network
Service and System both have ACL access to the path.

I was actually trying to set up a WCF server for net.tcp and don't see any
configuration options except Basic Settings, and I figured this (above) is
my first roadblock. But then I verified that the problem exists on Default
Web Site as well, so now I'm confused.

Jon