A few weeks ago I had one of those days...
I hosed my development environment, so that every time I attempted to create a new ASP.NET web application in VS.NET 2003, I would get the following error message: The Web server reported the following error when attempting to create or open the Web project located at the following URL: 'http://localhost/WebApplication1'. 'HTTP/1.1 403 Access Forbidden'.
I could create a web project in VS.NET 2002 without any problem (on the same machine). Another fun note was that if I created the virtual directory first in IIS manager, and create a project in VS 2003 pointing to that vdir it would work.
I looked through the MSDN docs, through the news groups, etc., but couldn't find a way to resolve the issue.
Turns out that I had somehow set my default web site’s Home Directory > Execute Permissions to None. Once I changed it back to Scripts only, bingo. VS.NET 2003 was happy.
So if you get a 403 Access Forbidden error message when attempting to create an ASP.NET web app in VS 2003, take a look at your execute permissions...