Distribution Point Share failing: Failed to create virtual directory on the defined share or volume on distribution point ?

Running SCCM 2007 sp2 R3 with 90 Windows 2003 distribution point shares.

One of them failed with: Failed to create virtual directory on the defined share or volume on distribution point

The distmgr.log   has:  

ERROR ExecMethod(): Failed to execute AppCreate2. error = The identity or password set on the application is not valid

ERROR CheckDPforDrizzle: Could not find the desired DP ["Display=\\pp120s1\lsdp$\"]MSWNET:["SMS_SITE=R04"]\\pp120s1\lsdp$\ in the SCF

Cannot set the current Drizzle Role status for the DP.

I can get it to stop the errors by turning off BITS on the distribution point.

I've noticed when comparing the IIS 6.0 settings between distribution points that the failing server is the only one that has a second listing under the default web site.  Its called SMS_DP_LSDP$ and it lists all the folders under my LSDP$ share.

I could start over with the failing DP but its a slow network connection and has over 100 gig of package files.

Any help our redirection would be great.