Getting access denied to modify anything on C Drive

Hello,
I have a weird problem where I'm using IIS7.5 to host a website. The issue is, even though I am pointing to the correct folder of the files, when you view them from the web browser, you will get 
401 - Unauthorized: Access is denied due to invalid credentials.
If I try to modify the files or view the html files in notepad, it tells me "Access is denied". Im the only admin on the server. Some other issues are not being able to zip a folder or move to another drive. They all give me access denied. I've
tried everything and don't know what else to do. I've tried several registry edits I've found on the web and in the forums too.
One funky thing I should mention is, if I view the properties to a file, it is set as read only and when I uncheck it and click ok and return to the file properties again, read only is still selected.
I hope someone here can shed some light on this issue I'm having. Thanks in advance.

Hi Kevin,
First make sure that the folders and files have necessary NTFS permission for the user.
http://forums.asp.net/t/1933345.aspx?IIS+7+5+Win2008+Server+R2+401+Unauthorized+Access+is+denied+due+to+invalid+credentials+
http://forums.iis.net/t/1180708.aspx?401+Unauthorized+Access+is+denied+due+to+invalid+credentials+
Regards,
Rafic
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