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Step 3: Installing IIS
Go to Start: Control Panels: Add or Remove Programs.
In the window that appears, click the Add or Remove Windows Components button in the left column. Scroll to "Internet Information Services" – if it's already checked, lucky you, go to Step Four. If not checked, check it and make sure "Network Services" is also checked (it's on by default), then click "Next". You'll probably be asked for your Windows installation disk, possibly even several times.

IIS is now installed, but if you're on Windows XP there's a good chance it doesn't work properly. When IIS is installed after .Net 2 is installed, any .Net 2 specific ASP calls will fail mysteriously. It's a common bug, and a real pain to diagnose unless you speak to someone who's already encountered it.
The fix: you need to run a small undocumented .Net utility that re-registers .Net with IIS. The utility is named aspnet_regiis.exe, and it is located under C:\Windows\Microsoft.NET\Framework\vx.y.zzzz\ (where x.y.zzzz is a version number) and you should call it with the -i parameter: aspnet_regiis.exe –i from a command prompt.
The easiest way to do this is to navigate to c:\Windows\Microsoft.NET\Framework\. Inside you'll see several folders starting with a "v" followed by several numbers, which represent the various framework versions. Pick the v2.whatever folder (on mine it's v2.0.50727) for WinXP. (Vista users should choose the v3.xxx folder, but I'm not sure if the bug affects you anyway, so check elsewhere for details)

Inside this folder you'll find the aspnet_regiis.exe file. Verify that the file is really there, but don't try to run it - it's just a DOS app.
Instead, we want to copy the full address path of the file. Select the address field, and copy it to the clipboard (ctrl-C or right-click and select Copy). 
If you don't have the address field showing, you can also right-click the aspnet_regiis.exe file, and click Properties. Select the entire "location" field, and copy that text instead. 
Now go to Start: Run, and Paste the address into that field. Just after that, type \aspnet_regiis –i and click OK. On my machine, the full line would look like this:
C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727\aspnet_regiis –i

This takes a minute or so to run, and fixes the bug.
To verify everything is working, open up IE or Firefox and enter http://localhost/ in the URL field. If you get either a "403" error or some kind of bland "you should really have a webpage" kind of remark, it's working. If the error is a "404" or any number higher than 500, there's a good chance something's unhappy with the security configuration on your computer, and you should seek a system administrator for further help.
IIS is now installed, but needs to be configured.
