I got this problem today trying out the WSE 3.0 HOL.
“Failed to execute request because the App-Domain could not be created. Error: 0x80070005 Access is denied.“
Luckily a comment on this blog had a solution to the problem. Turns out the default install path is too long!
http://mtaulty.com/blog/(atdtcsfes2idqbqlvd2fifjd)/archive/2005/06/05/2405.aspx
posted on Thursday, January 12, 2006 8:39 PM