Server Error 500 - c# IO.Directory.CreateDirectory() on Virtual Directory in another box

Hi Gurus, 
This is my first time setting up IIS on Windows 2003 server. I am trying to migrate my site from all-in-one-XP development box to Windows 2003+XPs environment.
My Environment: Windows 2003 IIS 6 + Virtual Directories in XP boxes
Background: 
            .My web site lets users upload/manage their folders/files under \Lib_Root.
            .\Lib_Root is a virtual directory pointing to an external XP box's C:\Lib_Root.
            .In XP box, I shared C:\Lib_Root and I allow network users to change files.
            .In IIS, I can see \Lib_Root content and I can delete the content.
           
Problem and my failed attem ...