I just wanted to point out that this user's comment fixed my problem and I'd like to give an example of how mine looked and what I changed it to.
The bottom of my C:\Windows\System32\inetsrv\config\applicationHost.config file had multiple entries for what seemed to be the main folder and then again for each individual folder. When trying to navigate to those folders I would get 550 Cannot create a file when that file already exists.
At the bottom of the bad file there was an entry for...
location path="Default Web Site"
and then additional entries under this for...
location path="Default Web Site/FAKEFOLDERNAME"
Once I removed the entries for these additional subfolders, everything worked fine.
Somehow I applied permissions incorrectly in IIS and couldn't re-do it in the GUI.