As you said there are several differences, it took me a while to get it to work...
(in IIS Manager)
You probably saw that the web applications runs in "Applications Pools", I'm using a "Clasic .NET AppPool" (I can't remember if I created it or it's part of the default installation), this App pool uses a "Classic" "Managed Pipeline Mode". And the application you want to run should use as "Behavior" that Application Pool.
Other thing you need to understand is that IIS 7 has a "more modular" installation, this means that there are more "pieces" that you can select/deselect, and there a couple of those that you need to turn on ("Turn Windows features on or off" in control panel), one of those is Windows Authentication (under World Wide Web Services->Security). After turning it on, you should go to your web application (in IIS Manager), look for the Authentication icon and set Windows Authenticatino to "Enabled".
If this doesn't fix your problems, at least will get you on the way. If you still have problems please post the errors you are getting with more detail, may be that will let me remember what other thing is missign (if there is any).
Guillermo Prina
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