Great video which explains a lot about users and IIS7.

http://dotnetslackers.com/articles/iis/Securing-IIS-Thwarting-the-Hacker-Week-23.aspx

Following the instructions on this site:

http://www.bluevalleytech.com/techtalk/blog/assigning-ntfs-folder-permission-to-iis7-application-pools/

I did not find that typing "IIS APPPOOL\mypoolname" worked.

Using ICACLS put the user into the list and then I could adjust permissions as needed with the GUI.

From the command prompt, I moved to the directory containing a directory that needed the updated permissions. Then I ran:

ICACLS wwwroot /grant "IIS APPPOOL\mypoolname":RX

* note that having a space in from of the ":" gives an invalid parameter message

http://technet.microsoft.com/en-us/library/cc753525(WS.10).aspx

http://salvoz.com/blog/2010/02/02/using-icacls-to-set-permissions-for-apppoolidentities-in-iis-7-5/