VWD2008 website page won't run under IIS8

I am setting up new Win 8 laptop.  Have added IIS using "add Windows features", and downloaded VWS2008 Express, since I have used this tool extensively a on prior Vista laptop.

I created a new test website using VWS 2008.  It tells me that "ASP.Net 2.0 has not been registered on the web server.  You need to manually configure your web server for ASP.NET 2.0 in order for your site to run correctly"

I click OK, and it creates a site, but the web.config file seems grossly incompatible with the installed IIS.

I changed .NET Framework version to v.2.0.50727  in the IIS root directory, which is my account name on this computer.  (I'd really like to do this for specific sites, but can't find an IIS8 way to do this.) 

Question: if this doesn't "register" ASP.Net 2.0 on my IIS8 web server, what does?

My attempt to run the default webpage created by VWS 2008 failed, first because it detected duplicate .config sections (the parent sites not allowing overrides of things like ScriptResourceHandler).  After resolving these problems, it reports that it cannot find my Default.aspx file.  It can find and display a .htm file from the site.  So the issue is with ASP.Net 2.0 running under IIS8.

HERE'S ANOTHER CLUE:

When I select the website in IIS8 then click "Basic Settings.." then "Test Settings" I get an authentication error:

The server is configured to use pass-through authentication with a built-in account to access the specified physical path. However, IIS Manager cannot verify whether the built-in account has access. Make sure that the application pool identity has Read access to the physical path. If this server is joined to a domain, and the application pool identity is NetworkService or LocalSystem, verify that <domain>\<computer_name>$ has Read access to the physical path. Then test these settings again.

I'd love to " Make sure that the application pool identity has Read access to the physical path." if I only knew how to do that.  I am the only account on this computer and an Administrator.

Any advice would be GREATLY appreciated.

Thanks.