First it was my own custom error logging assembly that gave me enough trouble I called Microsoft on it.
Once I got that resolved my second problem was related to the fact that I do not use the IIS Default Web Site. Disabling the default web site is a recommended security practice, so this note is to help you avoid spending as much time as I did on this problem. As soon as I discovered that the 2 web sites installed by the product were installed on the default site I decided that I would just re-create them on the site I wanted them to run on. The Report Manager application ran great, but none of the reports would work. They kept throwing a 403.14 HTML error. The 403 errors are security related, so at least I had a little clue about what to look for.
After wasting several hours trying to determine what I had configured wrong I finally stumbled on it by reviewing all of the IIS settings in my virtual directory and those of the original in the default web. The ReportServer virtual directory maps all files extensions (*) to .NET 1.1 aspnet_isapi.dll. Of course this is not documented anywhere and I overlooked the mappings. I had to discover this with my own trial and error. There are other unique settings for this virtual directory as well. So, now that I have everything working I decided to see who else might have had a similar problem. What I found is a nice article describing the exact steps you need to host Report Manager and/or Report Server on the virtual directory of your choice. Head on over to SQL Junkies to get all the details. Lets hope the SQL Reporting Services Team adds this kind of documentation to the next release.
To everyone who is writing applications that require custom IIS settings please do all of us Web administrators a favor. If you must tweak default IIS settings then document every single unique setting in your Advanced Install documentation. If you can avoid requiring custom IIS settings then please do so. If you make a nice installer for your web product then give us the option to choose obvious things like which web site we want your product installed on.