IIS7 & forms authentication

I've been struggling with this all day. I am trying to add forms authentication to my asp.net web site.

I have disabled Anonymous, Windows, ASP.NET Impersonation and enabled Forms Authentication.

I have created a Login.aspx page and have a Default.aspx page. Default.aspx is the default document.

I have added to web.config:

<authentication mode="Forms"/>

This is the behaviour I am experiencing:

1) When testing with http:\localhost\ I get a 401.2 error on the application root.

2) When testing with http:\localhost\Default.aspx I get a 401.2 error on Login.aspx, so redirection is happening but the Login.aspx is giving the error.

So it seems I have no access to any pages on the website even Default.aspx & Login.aspx.

But I canot find a solution, I have even tried:

  <location path="Default.aspx">
    <system.web>
      <authorization>
        <allow users="*"/>
      </authorization>
    </system.web>
  </location>

  <location path="Login.aspx">
    <system.web>
      <authorization>
        <allow users="*"/>
      </authorization>
    </system.web>
  </location>

But this doesn't seem to change anything.

I have also tried

<authentication mode="Forms">
  <forms loginUrl="Login.aspx" />
</authentication>

But this doesn't do anything different either.

Also if I revert to Anonymous or Windows Authentication then the default document redirection works.

I am using asp.net 3.5 on IIS7 on Vista Business.

Please help!