I see you are using ASP.NET 4.0 and I am sure you have it installed on your PC.
However, when I used Windows XP I always had to install the framework into IIS by running the following at the Command line from the folder of the version of the framework I wanted installed.
This installs the chosen framework into IIS
Sometimes when I had problems I would have to re-install the framework to IIS again.
Also I have heard that ASP.NET 4.0 is not that IIS 5/6 friendly. So if all else fails you may want to try installing mojoPortal for Dot.Net 3.5