Frustrating sharepoint team services 2.0 problem

Was fortunately solved by a newsgroup posting.

Path: g2news2.google.com!postnews.google.com!k70g2000cwa.googlegroups.com!not-for-mail
From: rrao1...@gmail.com
Newsgroups: microsoft.public.project.server
Subject: Re: The specified Windows account must be a valid user on the specified...
Date: 9 Nov 2006 12:04:57 -0800
Organization: http://groups.google.com
Lines: 256
Message-ID: <1163102697.216890.278320@k70g2000cwa.googlegroups.com>
References: 
   
   
   
   
   
   
NNTP-Posting-Host: 72.244.215.60
Mime-Version: 1.0
Content-Type: text/plain; charset="us-ascii"
X-Trace: posting.google.com 1163102702 3129 127.0.0.1 (9 Nov 2006 20:05:02 GMT)
X-Complaints-To: groups-abuse@google.com
NNTP-Posting-Date: Thu, 9 Nov 2006 20:05:02 +0000 (UTC)
In-Reply-To: 
User-Agent: G2/1.0
X-HTTP-UserAgent: Mozilla/4.0 (compatible; MSIE 6.0; Windows NT 5.1; SV1; .NET CLR 1.1.4322),gzip(gfe),gzip(gfe)
X-HTTP-Via: 1.1 Softek-WS2
Complaints-To: groups-abuse@google.com
Injection-Info: k70g2000cwa.googlegroups.com; posting-host=72.244.215.60;
   posting-account=n1ZQ3Q0AAAAKe9vGWR7XrB4Jopijgkqi

Hi Robert:

Did you get this issue fixed. I had the same problem, and it turns out
the IIS permissions are what's causing this error message. The message
is very misleading.

If you followed the installation instructions exactly as listed, then
just check your Default Website Permissions. Anonymous and Integrated
Windows Authentication should be enabled. And both, the ProjectServer
and Sharepoint Central virtual servers should have their Integrated
Windows Authentication enabled.

Let me know if this works for you.

Best,

Talking about misleading error messages!
Rahul.