This is driving the whole team crazy. There must be some simple mis-configured part of IIS or our Web Server, but every time we try to run out ASP.NET Web Application on IIS
Check the .NET version of the app pool (e.g. 2.0 vs 4.0)
Check that all IIS referenced modules are installed. In this case it was the AJAX extensions (probably not the case these days), but URL Rewrite is a common one.