Hello Stephen,
This error may occur for this two reasons:
1. If the logged user has no administrative permissions.
2. If IIS is not properly configured to use ASP.NET.
You can also have a look at “Configuring IIS” chapter in User Manual.
Also, could you please check up if it is possible to create virtual directories manually?
Thanks a lot in advance for your cooperation!
Best wishes,
Pepi
the Telerik team