Failed to execute request because the App-Domain could not be created. Error: 0x80070005 Access is denied

I am doing production releases to my website for quite sometime. We have a proper QA and Release process in place to do incremental releases. This error perplexed me yesterday when we were doing xcopy deployment to the .NET website. All I could see was the above error message getting logged in the Event log. I gave the same exact search in google and there were a whole bunch of suggestions but no cutthroat solution.

Solutions I found talked about reinstalling .NET, Cleaning up the global assembly cache, some suggesting to change the username under processModel of the machine.config file to a high privilege user account of SYSTEM than the default low privilege machine account. I was never convinced that these were related to the problem in hand.

Finally I nailed the problem down to not having read & execute permission on the production virtual directory folders. I gave the IUSR_machine name and IWAM_machine name the read and execute permissions on all the project folders and it started working again. I am still investigating on the sorcerous disappearance of these permissions. I am sure the other solutions in google may be applicable in some scenarios but take a look at the permissions before diving deep into these solutions..