Does the project work fine with the built-in web server that comes with the Project Manager? If so, then maybe there is some problem related to your infrastructure. Do you mind changing the associated application pool's property Managed pipeline mode
(which is selected as default for newly created application pools) to Classic
? Generally there should be no problem running in both modes, but there might be some different settings in the machine key configuration, that's why I'm recommending this. if it doesn't help, can you, please provide me with login credentials to your site, so that I can inspect the described behavior. Also, you might open a bug report and explain the issue there, as well as attach a copy of your project with database.
the Telerik team