When an application is run out of process, the IWAM_<MachineName> account is used for authentication. If IWAM_<MachineName> does not have the right to "Act as part of the operating system," this error will occur.

Grant the IWAM_ account the right to "Act as part of the operating system":

Instructions for NT Operating System:

1. Open "User Manager for Domains" ("User Manager" if you are using a Workgroup network).
2. Select User Rights from the Policies Menu.
3. Enable the "Show advance user rights" checkbox.
4. Select "Act as part of the Operating System" from the dropdown list of rights.
5. Add the IWAM_ account to this list.
6. Reboot the server. The server must be rebooted for these changes to take effect.
7. Click OK and close the User Manager.

Instructions for Windows 2000 Operating System:

1. Start
2. Settings
3. Control Panel
4. Administrative Tools
5. Local Security Settings
6. User Rights Assign
7. Double-click on "Act As Part of the Operating System"
8. Click "Add"
9. Select IWAM account from the list
10. Click "OK"