I had a similar error on IIS proper but it came back after I installed Visual Studio 2010 SP1 and started using IIS Express.
ASP.NET works right out of the box, but they first call to a classic ASP page results in the basic:
HTTP/1.1 New Application Failed
error page.
The problem is actually the same, I have a
<system.webServer><asp>
section in my web.config and IIS does not allow this, but could really come up
with a better message to tell me.
To fix this in IIS Express, find the configuration file, in my case at C:\Users\username\Documents\IISExpress\config\applicationhost.config.
After making a backup, open it in a text editor and find the line
<section name="asp" overrideModeDefault="Deny" />change the Deny to Allow.