One thing to try, perhaps, is to be sure that the ASPNET account (i.e., the ASPNET process) has read/write access to the Temporary ASP.NET Files/blah path. The program not executing is the VB compiler, fwiw. Also, you might try cleaning out all the existing contents of the temp folders.
If that doesn't work, I'll see if we can find someone who might have some insights.
-- Mike Pope
ASP.NET User Education
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