This error could be caused by the following:
•The user, with which you are logging in, does not impersonate to an existing windows account. Make sure that Integrated Windows Authentication
is enabled and Anonymous access
is selected for the Sitefinity3.0 virtual directory in the IIS.
•The windows account, to which the user is impersonated, has no rights to create virtual directories. Could you set up virtual directories under IIS manually?
Hope this helps.
the Telerik team