Update: Running as administrator fixed the error. However, I still wonder whether I should use the IIS 7/8 .NET Handler or the IIS 7/8 ISAPI option in Step 1 of the New Project dialog.
I'd recommend the .NET Handler. It has a few extra features and performance is slightly better on IIS 7/8 as well it's more stable in some situations. The thread management is much simpler in this implementation so there are much fewer situations where threading/COM issues will creep up (not that there were a lot with ISAPI either ;-))
+++ Rick ---
from Maui, Hawaii