I too had been experiencing this problem after installing XP service pack 3
last week.
Too fix this issue I had re-assign all file permissions to my root web folder.
Remove all permissions and re-assign the groups administrators, authenticated
users and everyone FULL CONTROL of this folder.
Click the advanced button and make sure permissions are not being inherited
from the parent folder.
Then select the option to re-assign all permissions to all child files/folders.

Good luck.