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Event ID: 1007 Source: ASP.NET1.0.3705.0

aspnet_wp.exe could not be launched because the username and/or password supplied in the processModel section of the config file are invalid.
The first thing to check will be if the account is locked or not. I had the same issue and the account was locked. I unlocked it and everything was back to normal.
ME811320 provides information related to this event.
Running Microsoft ASP.Net on a domain controller is not a particularly good idea. The worker process (Aspnet_wp.exe) runs with a weak account that fails on a DC. You''ll have to grant appropriate permissions that will seriosly affect your security. See ME315158 for further details.
The security settings were tightened in the release version of ASP.NET. For a development site, you can relax the security as described below. (Note: Giving System rights is not recommended for a site exposed to the Internet as the permissions are too broad.):
- Set the userName attribute to SYSTEM in the <processModel> section of the Machine.config file. This configures the worker process to run as the SYSTEM identity.
- If you want to configure an arbitrary account for the process, the account must be an Administrator account. You can configure an arbitrary account for the process in the <processModel> section of the Machine.config file.
See ME315158 and also

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