IIS 7 Permissions issue

We are using windows 2008 for our internal Intranet server.  We want to restrict some of the sub folders to specific a domain group.  We have Windows authentication enabled (anonymous is disabled).  The NTFS permissions on the folder are set as follows:
 - WebAdmins = Full Control
 - RegistrationStaff = Read & executie, List folder contents, Read
WebAdmin users and Technical Staff users are given a "500 error". If I add "Domain Users" or IIS_IUSRS to the folder, then EVERYONE can access it! 
My Accepted Solution:
 http://technet.microsoft.com/en-us/library/cc753695%28WS.10%29.aspx

****AS IS****; Please apply at your own risk.