Error: Invalid Application Path

I was testing the application basic settings and came across the error as follows:



The application was connecting using a Application User (Pass through Authentication).

Env Details:
The VM was running in a domain and i created a custom user account which the application was using.

Then i changed the Connect Using to Specific user which i created in the application.
On testing the settings, they were successful.

But on moving back to Application User (Pass through Authentication) it was failing and it was a point to be worried of.

I tested my application and it was working file, i am still not able to fix this issue in IIS.

I went through a couple of articles on IIS Forum, it appears to be a bug, i am not sure:

•  http://forums.iis.net/t/1177952.aspx
•  http://forums.iis.net/p/1182820/2000936.aspx

Hope this may help.................